Saturday, April 4, 2009

Investors Need to Be Vigilant

A report from the straits times asking investors to be vigilant:

INVESTORS have to be more vigilant about where they put their cash as the financial crisis exacts its toll on listed companies here.

The Singapore Exchange (SGX) raised the issue on Friday in the wake of a growing number of companies where auditors have flagged concerns over their books.

It outlined what measures it was taking to strengthen corporate governance but warned that greater scrutiny coupled with the financial crisis may bring more problem cases to light.

'Inevitably, these additional checks, greater disclosure requirements, and emphatic reminders to heighten vigilance will surface undesirable detritus,' it said.

'This is not unexpected given the current hostile economic environment. The (SGX) is prepared to face this squarely.'

Auditors have raised red flags over a dozen companies - particularly China-based firms, or S-chips - in recent months as they step up checks on company books.

The SGX is 'acutely aware of the risks presented by companies operating in foreign countries, including S-chips', it said, but added: 'The market needs to distinguish companies that are adversely affected by the current crisis as against those who resort to fraud.'

It said about 142 listed companies have issued profit warnings and guidances since the beginning of 2008.

Analysts say the financial crisis has tended to increase the risk of fraud, as fear of losing bank financing could pressure some executives to cook the books.

But many companies are also facing a 'going concern' issue where the survival of the firm is at risk.

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