Warning… Don’t Invest In These Chinese Stocks!

| June 21, 2011 | 0 Comments

Chinese YuanThe global markets can provide incredible profit opportunities for investors.  Whether it’s buying shares in high growth penny stocks or adding ETFs to your portfolio, the market is teeming with potential.

But just because you see a stock or fund that looks like a winner, doesn’t mean it really is.  I’m talking about great stories, not great companies… there’s a big difference!

You’ve seen them before… companies touting unbelievable profits – selling ground breaking products that no one can live without.

Wow, that sounds good… Where do I sign up?

Stop right there!

You see, there are some real shysters out there just waiting to con you out of your money.  These scams are regularly being hatched all over the world.  And some of the biggest offenders are in China.

In this case, it’s an OTC (Chinese) Reverse Merger.

Now there are a lot these Chinese reverse mergers out there.  But, I’m going to expose a company you should avoid like the plague – fleecing unsuspecting investors as we speak.

First, let me explain how it works…

To start with, not all stock markets are created equal – take the Shanghai Stock Exchange for example.

The Shanghai Exchange has many restrictions including strict trading rules for foreign investors and challenging cash controls.  Add to that a long list of requirements to bring a company public and you’ve got a very difficult market to enter.

How hard could it be?

Well, a company needs to have been in business and show profits for three consecutive years.  And here’s the big deal killer… the company must not have committed any major illegal activities or been caught with false accounting records in the last three years.

Now, the Chinese authorities do afford most companies fairly lenient accounting and reporting guidelines after they go public.  But fabricating a company’s true financial condition is a line in the sand most CEOs won’t cross.

Here’s the thing …

If a Chinese company lies or stretches the truth about their company and the authorities get wind of it, watch out!  Punitive action is swift and final… like being shot in public for example.  Not an option anyone would choose.

This limits many small Chinese companies’ ability to finance their company by selling stock.

So, some choose to come to America instead.

And with a recipe of lies, fake financials, and expensive hype, they embark on a scheme to make themselves appear like the next Apple (AAPL).

OK, now it’s time to reveal a company playing this preposterous game…

And the stickup artist is… Xinde Technology Company (OTCQB: WTFS).

Today, XINDE is being touted as a “Chinese diesel powerhouse”.  They allegedly make fuel injection systems that are revolutionary and will change the world.  Yeah, this should be a real game changer for the planet!

So to get things started, they bought a US company once traded on the OTC Market, Wasatch Foods.  The transaction gave Xinde instant access to the market, while providing only limited financial information.

Here’s the problem…

The financials and company details they’re presenting contain mostly unverifiable information.  Do you trust a company that doesn’t report to the SEC?

And that’s not all…

You might already be familiar with this company.  A big reason may be all the money that’s been spent marketing this gem.

It may shock you to learn, public relations firm Gladiator Stocks was paid $800,000 to push the B.S. company.  Hundreds of thousands of e-mails shot out attempting to lure investors into buying Xinde’s irresistible shares.

But here’s the thing…

Gladiator is a known “pump and dump” firm pushing garbage all over the net.  Would a legitimate company pay $800,000 to crackpots to advertise in such a suspicious way?

So far it’s working.  In the last few days, the company’s trading volume has exploded.  It recently went from zero to over eight million shares traded in a single day, generating more than $6,000,000 in cash!  Mission accomplished!

And this story really isn’t that unique.  Hundreds of bogus companies are plopped onto the market everyday.

But investing in legitimate small cap companies can afford great opportunities.  The potential for profits can be sizeable and REAL.  These are investments that will allow you to sleep at night.

You see, we all need to have confidence in the companies we invest in.  And the great news is we can find solid companies with financials that are reported to the SEC.  Firms using pump and dump companies to get the word out just can’t be trusted.

They say there’s nothing like the real thing… I couldn’t agree more!

Until next time,

Brian Walker

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Category: Penny Stock Tips, Technology Stocks

About the Author ()

Brian joins the Penny Stock Research team as a seasoned independent trader and financial analyst. Brian graduated with a B.S. from the University of North Florida and now resides in Scottsdale, Arizona. With a background in economics and statistics, he has a keen ability to uncover profitable and growth-focused companies. He has years of real life know-how in analyzing fundamental and technical data that gives him an edge drilling down on companies and financial results. With over 15 years trading experience, Brian has become an expert in the ever-changing equities markets. Today, he scours the markets hunting for penny stocks that offer low risk and high reward.