Hi folks. I know I haven’t posted anything in quite a while. It’s been a busy time at work over the summer but I’ve been to the site off and on.
Anyway, I thought you all might find this interesting. Could this be a sign of things to come? Do you think companies in other countries could follow suit? Note the paragraph stating:
“Some Chinese companies say they are pulling out of U.S. markets because a low share price fails to reflect the strength of their business. Withdrawing also eliminates the cost of complying with American financial reporting rules.”
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IMO the burden of SEC compliance is a face-saving excuse for a China-centred company not to list in the U.S., the same way that censorship was a face-saving excuse for Google to pull out of the China search market — probably not the primary driver, though it certainly doesn’t help matters.
The U.S. media tries to pretend that the delistings and abandonments of plans to list are all attributable to shady “reverse merger” companies which bribed their auditors to give them a clean bill of health. The Chinese media tries to pretend that U.S. regulators are using unreasonable and burdensome regulations to engage in indiscriminate nationalistic attacks on all Chinese companies. As ever, you have to take a weighted average out the two opposing sides’ propaganda to get some approximation of what’s really going on. The only thing that’s changing these days is the weights assigned to each side …
China may buy 75% stake in Barrick Africa. I think it is clear that China is moving out of US dollars and diversifying seriously its currency holdings, especially by purchasing gold. Zero Hedge reports that China has bought 383 tons of gold thus far this year–I think that this is in addition to their domestic production. These kinds of actions are signals, in my opinion, the beginning of the end of Chimerica (Neill Ferguson’s term for the trade relationship between US and China, where China sells cheap products to the US and then props up the US economy by buying US treasury debt).
China could break the US economy in a day if it wanted to: All it has to do is put its US treasury debt, still around 1 trillion, on the market. Soros broke the bank of England with far less. The golden rule applies in this case: he with the gold rules. China will be able to break the US economic hegemony and then issue a gold-backed currency, and they will be the only liquid player left in the world markets. China is not without economic problems, obviously. But they now have the power to destroy the economy of the United States, and they can do it without firing a shot. Hopefully, the generous philosophy of Jet Li will guide their future actions.
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Well, it’s the obvious move to make and the right time to make it. Fundamentals are ignored entirely and Market Cap is suppressed as any “China rumor” impacts the entire basket. With a lower than realistic market cap and record low volume, it’s a great time to just end the experiment and walk away relatively safely.