Any investor contemplating investing in a Chinese company needs to read this article in today’s WSJ.
Air China, which is trying to raise as much as $1.1 billion through an initial public offering of shares in the Hong Kong market, is telling investors that it plans to upstream as much as $1 billion with a finance company controlled by its parent, China National Aviation Holdings Co. Investors will get to ride in the back seat.
You are going to see a lot more of these. Chinese leaders have decided that the only way to deliver the rising living standards their people expect is to import massive amounts of capital. That means enticing foreign direct investors and selling securities of domestic Chinese companies in foreign markets.
Warren Buffett once described investing in an airline as temporary insanity.
Investing in an airline in the Hong Kong market owned by a Chinese parent is permanent insanity.
