This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Caterpillar Caper Bugs China's Private Equity Market

Apparently investors know that. Share prices for the world's largest maker of earthmoving, construction and mining equipment fell 2.19% from Jan. 22 to Jan. 25, but they have risen past the Jan. 22 level since then.

In what has shaped up as an iconically famous case, Toronto-listed Sino Forest Corp. was accused by a short seller in 2011 of overstating revenue and giving false numbers about its timber acreage rights in China. The Canadian stock exchange forced the company to delist last year.

According to the online business news website Quartz, U.S. investors in China have lost billions of dollars after alleged accounting problems pushed more than 100 Chinese companies off stock exchanges in Canada or the U.S.


Still, major private equity firms such as Goldman Sachs (GS), Carlyle Group (CG - Get Report) and KKR & Co. (KKR - Get Report) have proven they know how to work the China market.

Carlyle alone has invested around $4 billion in China, covering 60 deals, the state-run China Daily newspaper reported last year without giving a source. In July the group bought a 49% stake in Mandarin Hotel Holdings of China and will "work with it to tap the country's emerging mid-tier hotel market," the newspaper said, speculating that the deal was worth a high eight-digit figure.

There is no immediate reason to imagine these companies will be scammed. But Huang, among others, complain that all foreign investment firms in China face another barrier -- the recent formation of some 10,000 cutthroat local rivals doing business in Chinese yuan. They understand the Chinese market and deal-making mentality. Thanks to China's rapid economic growth over the past decade, they also have as much money as their foreign competitors. In 2010, yuan funds outraised foreign currency funds.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
CAT $83.92 -0.80%
CG $29.39 -1.14%
KKR $23.16 -0.17%
AAPL $126.91 -0.54%
FB $83.62 0.64%

Markets

DOW 17,949.59 -85.34 -0.47%
S&P 500 2,097.29 -3.11 -0.15%
NASDAQ 5,014.1020 +19.50 0.39%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs