Claims of accounting irregularities at Chinese companies are set to continue and could affect even diligent companies’ access to funding, according to a report from ratings agency Fitch.
Released yesterday, the report reviews the roughly 40 issuers in Fitch’s Chinese portfolio, the majority of which are listed in Hong Kong.
‘Fitch does not expect the flow of accusations and investigations to slow down in the near term, particularly if short selling is involved,’ the report notes.
‘Some of the accusations will be legitimate; some will be erroneous; many will be a mixture. All have the potential to present liquidity problems for an individual issuer and its closest peers.’
The report lists a number of accounting and governance issues that can highlight or mask problems, such as high levels of revenue and capital expenditure growth, high levels of cash relative to debt, ownership concentration and long-serving independent board members.
