Monday, 2 December 2013

Australia China Holdings (AAK.AX) and its pear fund friends

Bermuda incorporated Australia China Holdings (AAK.AX) is yet another ASX-listed investment company featuring crossholdings and related party transactions, with several of its subsidiaries showing up as top twenty shareholders of the company. AAK claims operations in "trading, property investment, hotel management and other projects in environmental businesses", and has 3.5bn shares outstanding, the result of decades of share issues and ramps. These shares currently trade at a "market" price between $0.001-0.002, giving AAK a market cap up to $7m.

AAK offers Australian investors an opportunity usually only available from Nigerian princes. According to its latest annual report, AAK has assets of $73m in the form of a deposit paid on Mongolian farmland. Now AAK shareholders just need to pay another $1m in "registration fees", and they will own farmland worth $73m! (AAK's Malaysian auditor carefully qualified its opinion as to the "recoverability of the deposits", AAK's only asset.) This invaluable farmland has so far provided zero actual cash flow for AAK, despite AAK apparently having leased the farmland to the ungoogleable "Beijing Shuimu Zhongtian Institute of Horticulture Sciences" for $2m a year in 2011. In fact, AAK mysteriously had no operating cash inflows at all for the last five years.

That's OK though, because operating cash flows are not necessary for securities fraud. AAK has an ASX-listing and sports a "market" value endorsed by ASIC, and this in and of itself gives AAK utility for revaluation fraud. In December AAK announced it has forged a strategic agreement with an unnamed Chinese investment group with strong backing from "pear fund managers" (sic), to issue more shares.

The unnamed investment group and AAK will obtain financing, invest in each other, and place shares together. The related party is about to start again, with ASIC proudly chaperoning.


  1. A heads up for you. There is a correlation between the money market operations of the RBA & the yields (more or less inverse of the price) on money market 'instruments', that includes the ASX. This is to be expected since the Australian money market is denominated in Australian dollars, the obligation of the RBA.

    November saw the introduction of the RBA's 'Liquidity Facility', whereby it lends against any kind of garbage - especially mortgage credit - it pleases, at the cash rate. There has been a concomitant record increase in the balances of 'account holders' with the RBA. These 'exchange settlement' balances are the means by which the credit of commercial banks is monetised.

    Something is afoot.

    1. Thanks for the heads up, Scrutinizer. I wonder where all that new money is flowing, eh? Into anything and everything promising >2.5%

  2. Mostly junk, what the RBA calls Asset Backed Securities, but there has been a fair old ramp up in Government securities too ie. junk. The RBA has been monetising junk for a long time, nothing new there, what is most interesting is the increase in settlement balances of the commercial banks, greater than the Asian crisis in 1997 & the GFC.

    Money market spreads have narrowed considerably in the last 12-18 months, ie. securities prices have risen, record bank profits etc. There doesn't seem a particular need for such 'active' management by the RBA, that's why I say something is afoot.