The China Series: If You Think Things Are Bad Now...

The accounting research firm, GMT Research

Lisa Mangkornkarn

The accounting research firm

GMT Research

GMT Research provides independent insight into markets, sectors and companies throughout Asia. Our unique method of mining a comprehensive collection of corporate financial statements for key data allows us to evaluate the financial health of a company, sectors and the market at large. We also investigate the application of accounting standards by companies and sectors, shedding light on the quality of reported profits. Armed with this information, we help investment professionals navigate the financial landscape.

Thematic (Sector/Industry)

<div class="intro"><em>All roads lead to China – but not in a good way. </em></div><div class="intro"> </div><div class="intro">Our Asian-focused thematic accounting reports always end up with a shortlist dominated by Chinese companies. This is largely because they are over-leveraged and face a deteriorating trading environment which creates the incentive to inflate profits. However, EPS is beginning to fall and yet Chinese stocks are the most expensive in the world; its analysts are also the most bullish (see charts within). Could this distorted interpretation of reality stem from the government’s support of the stock market while concurrently applying pressure on analysts to tow the party line? There is, after all, no bad news in China. The last time analysts were under this sort of pressure was in the run up to the 1997 Asian Financial Crisis. It smacks of desperation. The risks to investors have never been higher and now, more than ever, they need <em>objective</em> research.</div>

All roads lead to China – but not in a good way.  Our Asian-focused thematic accounting reports always end up with a shortlist dominated by Chinese companies. This is largely because they are over-leveraged and face a deteriorating trading environment which creates the incentive to inflate profits. However, EPS is beginning to fall and yet Chinese stocks are the most expensive in the world; its analysts are also the most bullish (see charts within). Could this distorted interpretation of reality stem from the government’s support of the stock market while concurrently applying pressure on analysts to tow the party line? There is, after all, no bad news in China. The last time analysts were under this sort of pressure was in the run up to the 1997 Asian Financial Crisis. It smacks of desperation. The risks to investors have never been higher and now, more than ever, they need objective research.

All Roads Lead to China