Shanghai Electric boss detained
(China Daily)
Updated: 2006-08-16 09:27
Hong Kong-based analysts said the scandal would definitely tarnish the
company's image, but they applauded the efforts of the mainland authorities to
crack down on corruption and improve corporate governance.
Andes Cheng, associate director of South China Research, said that the
incident would inevitably harm investor confidence, especially in Hong Kong. "It
might be the tip of an iceberg. More and more scandals could be uncovered."
He believed that the central government would step up its effort to crack
down on corporate embezzlement and fraud.
"Although such a move would have an impact on the market, it could improve
the operation of mainland companies and boost overseas investors' long-term
confidence," he said.
Terence Chong, a professor at the Chinese University of Hong Kong, said that
such a crackdown would send a positive signal to the market.
"Mainland companies used to be known for their poor corporate governance.
This incident points to the central government's determination to put this
right."
"However, mainland companies' corporate governance remains far from the
international level," added Chong. "The mainland's accounting standards should
ultimately reach the global level."
Analysts added investors would not desert Shanghai Electric because they have
more confidence in State-owned firms than private ones.
"When a State-owned company goes bankrupt, government shareholders will take
the responsibility for bailing out minority shareholders. But if a private
company goes under, minority shareholders may lose everything."
Fu Hung-man, dealing director of Polaris Securities, said that the incident
was not likely to dampen investors' enthusiasm for Shanghai Electric.
"Investors are so 'irrational and myopic,' sometimes many of them even don't
know who is the chairman of the company they have invested in."
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