Identifying 'red flags' in Chinese companies as A-shares market opens up

Report by Janus Henderson Investors

Janus Henderson Investors' China team has published a report highlighting the factors for investors to consider when selecting Chinese companies and demystifying the myths about the country, as it opens up the A-share market to foreign investors.

The report Signals and Smokescreens was based on a study of over 50 Chinese companies which have suffered difficulties, particularly during 2011/12, and whether signals could have been identified before their fall.  Written in tandem with Chinese businessman Tim Clissold, the team highlighted areas to consider such as financial ratios, board oversight and stakeholder relations. Most of the large failures, it said, were caused by problems with Chinese governance but were magnified by investors' difficulties in analysing risk. Problems included a chief financial officer being denied acc...