Chinese Stocks Fall, ChanPark Report

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) October 6, 2011 --

China's stocks fell, sending the benchmark index to its lowest level since July 2010, on concerns that government measures to tame inflation and a faltering global economy will hurt earnings growth. The Shanghai Composite has tumbled 15 percent this year, extending last year's 14 percent drop, as the government raised interest rates and reserve-requirement ratios for banks to cool inflation that's at the highest level in almost three years. The gauge has sunk 13 percent this quarter, set for the biggest loss since the three months to June last year. Shares of some Chinese companies listed on exchanges in the United States tumbled on Thursday after a top American regulator said that the Justice Department was reviewing accounting irregularities at various companies based in China. Chinese Internet companies were particularly hard hit, including Youku (NYSE:YOKU) and Tudou (NASDAQ:TUDO), Chinese video posting sites, as well as Baidu (NASDAQ:BIDU), Sohu (NASDAQ:SOHU) and Sina (NASDAQ:SINA), also Internet stocks. The drop in share prices came after Reuters published an interview with Robert Khuzami, the enforcement chief at the Securities and Exchange Commission, who indicated that federal prosecutors were looking into possible accounting frauds. Sina Corp., owner of the Twitter-like Weibo service in China, fell as much as 16 percent and Baidu, operator of China's most popular online search engine, dropped as much as 12 percent. At least four Chinese Internet companies fell sharply last week, triggering an SEC short-selling restriction that forces traders who want to bet on a further drop to wait until after the stocks fell 10 percent from the prior day's closing level. In the past year, regulators have intensified scrutiny of China-based companies listed on U.S. exchanges amid concern that the firms weren't complying with accounting standards. The SEC and exchanges have delisted or halted trading in more than a dozen such companies this year, and the agency has sued firms and auditors over bogus disclosures. The SEC only has power to file civil claims for securities law violations, while the Justice Department can file criminal charges. The SEC's investigation has focused on so-called reverse mergers, in which closely held firms buy shell companies that allow them to sell shares on exchanges without the scrutiny that would surround an initial public offering. None of the four Internet companies affected by the SEC restriction today (including Youku.com Inc. and Sohu.com Inc. ) were listed through reverse mergers. SEC officials have said they can't adequately police the firms in part because the Chinese government bars U.S. regulators from inspecting auditors based in that country. Officials from the two countries have met in recent months to discuss the issue though no resolution seems imminent.

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