But These Stocks are the Real Traps
Long-term readers know that I am bullish on China stocks and Asia at large, but there have been numerous reports of late of Chinese companies being embroiled in accounting scandals and questionable practices. For example, China stock Rino International (OTC: RINO) recently admitted to falsifying its numbers and was delisted from the Nasdaq. Unfortunately, this type of scandal has tainted the whole sector, preventing some investors from taking part in the Chinese wealth machine.
Clearly, the lack of credibility in RTO Chinese companies is now a big problem for China stock investors. Each time a previously unknown small research shop, blogger or short-seller raises questions, many of these small-cap reverse-merger stocks drop dramatically before the claims can be examined at depth by investors. As a result, many investors are selling first and asking questions later — if at all. The template seems to be a short-seller will short a small Chinese stock, release a negative report on the stock — pushing it out on a personal website and spreading it through online financial message boards and communities — then cover after the stock drops
So it is more important than ever before to have a China guide to make sure that you avoid these China stock traps — and on the following pages are a few stocks that I think have more downside than upside.