Post by Khoo Boon Han

𝐂𝐡𝐢𝐧𝐚 𝐇𝐮𝐬𝐭𝐥𝐞 Recently, a China client of mine came to Malaysia exploring opportunities to expand their beverage business. Naturally, I suggested Malaysia to be one of their options to raise funds through our capital market. After all, getting listed in China is notoriously difficult. Companies there face a long “queue” under tight regulatory thresholds and a tedious approval process. Malaysia, in contrast, seems more approachable …… or so I thoughtt. But when I tried introducing IBs to them, most bankers politely advised me to tell the client not to waste their time or money pursuing a Malaysian listing. One banker, perhaps too tired to explain, told me to go watch “𝐓𝐡𝐞 𝐂𝐡𝐢𝐧𝐚 𝐇𝐮𝐬𝐭𝐥𝐞” you’ll understand why. So I did. That documentary was an eye-opener. It exposes how, after the 2008 financial crisis, Chinese companies that went public in the U.S.A. overstated earnings and even fabricated entire businesses. Due diligence reports were glossed over. 𝐈𝐧𝐯𝐞𝐬𝐦𝐞𝐧𝐭 𝐛𝐚𝐧𝐤𝐞𝐫𝐬, 𝐚𝐮𝐝𝐢𝐭𝐨𝐫𝐬, 𝐯𝐚𝐥𝐮𝐞𝐫𝐬, 𝐚𝐧𝐝 𝐥𝐚𝐰𝐲𝐞𝐫𝐬 𝐚𝐥𝐥 𝐩𝐥𝐚𝐲𝐞𝐝 𝐭𝐡𝐞𝐢𝐫 𝐩𝐚𝐫𝐭𝐬, 𝐰𝐡𝐞𝐭𝐡𝐞𝐫 𝐛𝐲 𝐨𝐯𝐞𝐫𝐬𝐢𝐠𝐡𝐭 𝐨𝐫 𝐜𝐨𝐦𝐩𝐥𝐢𝐜𝐢𝐭𝐲. When investigators visited the supposed “factories” in China, they found empty buildings. Shell companies. Faked reports. Money gone. Investors burnt. The regulators, meanwhile, were left dumbfounded by the aftermath. And just like that….. billions disappeared, with barely any consequences. Malaysia wasn’t spared either. Those China-based companies that were listed here after 2008 (early 2010s) eventually vanished or were delisted…….. plagued by corporate governance issues, accounting irregularities, and poor performance. 𝐑𝐞𝐠𝐮𝐥𝐚𝐭𝐨𝐫𝐬 𝐭𝐨𝐨𝐤 𝐭𝐡𝐞 𝐡𝐢𝐧𝐭. 𝐒𝐢𝐧𝐜𝐞 𝐭𝐡𝐞𝐧, 𝐭𝐡𝐞𝐫𝐞’𝐬 𝐛𝐞𝐞𝐧 𝐚𝐧 𝐮𝐧𝐰𝐫𝐢𝐭𝐭𝐞𝐧 𝐫𝐮𝐥𝐞 : 𝐚𝐯𝐨𝐢𝐝 𝐚𝐧𝐲𝐭𝐡𝐢𝐧𝐠 𝐂𝐡𝐢𝐧𝐚-𝐛𝐚𝐬𝐞𝐝, 𝐨𝐟𝐭𝐞𝐧 𝐬𝐭𝐞𝐫𝐞𝐨𝐭𝐲𝐩𝐢𝐧𝐠 𝐞𝐯𝐞𝐫𝐲 𝐧𝐞𝐰 𝐨𝐧𝐞 𝐭𝐡𝐚𝐭 𝐭𝐫𝐢𝐞𝐬 𝐭𝐨 𝐫𝐞𝐚𝐜𝐡 𝐨𝐮𝐫 𝐜𝐚𝐩𝐢𝐭𝐚𝐥 𝐬𝐡𝐨𝐫𝐞𝐬. The lesson? 𝐈𝐧 𝐭𝐡𝐞 𝐜𝐚𝐩𝐢𝐭𝐚𝐥 𝐦𝐚𝐫𝐤𝐞𝐭 𝐠𝐚𝐦𝐞, 𝐟𝐫𝐚𝐮𝐝 𝐢𝐬 𝐨𝐟𝐭𝐞𝐧 𝐣𝐮𝐬𝐭 𝐚𝐧𝐨𝐭𝐡𝐞𝐫 𝐥𝐢𝐧𝐞 𝐢𝐭𝐞𝐦 𝐢𝐧 𝐭𝐡𝐞 𝐛𝐮𝐝𝐠𝐞𝐭. 𝐘𝐨𝐮 𝐩𝐥𝐚𝐧 𝐟𝐨𝐫 𝐢𝐭. 𝐘𝐨𝐮 𝐩𝐫𝐢𝐜𝐞 𝐢𝐭 𝐢𝐧. 𝐘𝐨𝐮 𝐩𝐚𝐲 𝐭𝐡𝐞 𝐟𝐢𝐧𝐞 𝐚𝐧𝐝 𝐦𝐨𝐯𝐞 𝐨𝐧. Remember Serba Dinamik? A mere RM3 million fine, while RM6 billion in market capitalisation were wiped out (including my RM150k). Meanwhile, an ordinary citizen goes to jail for stealing a loaf of bread. That’s capitalism at its worst. Rewarding those who dare to take advantage of others, as long as they play it smart enough. Many dream of becoming lawyers to defend justice. Few realise they’ll spend their careers defending capitalism instead (i.e., those who can afford it). 𝘗.𝘚: 𝘗𝘩𝘰𝘵𝘰 𝘩𝘢𝘴 𝘯𝘰𝘵𝘩𝘪𝘯𝘨 𝘵𝘰 𝘥𝘰 𝘸𝘪𝘵𝘩 𝘵𝘩𝘦 𝘢𝘣𝘰𝘷𝘦. 𝘚𝘦𝘬𝘢𝘥𝘢𝘳 𝘱𝘢𝘴𝘶 𝘣𝘶𝘯𝘨𝘢. #kbhsays