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Accounting...

28 July 2016 by lberuti

Over the last few sessions, Japanese risky assets have benefitted from the announcement by PM Shinzo Abe of an economic stimulus package worth over 28tTrnY. One can only wonder what would have happened to CITOH ( Itochu Corp ) under normal circumstances then. Yesterday, an activist short-seller research group published a report criticizing the trading company’s accounting and said it would “likely become the next Japanese company to be forced to restate its financials”, questioning the treatment of 3 investments, most notably a stake in a Colombian coal mine. The company swiftly issued a statement saying that CITOH follows correct accounting procedures and that its financial statement are approved by outside auditors. Other analysts commented that the report had not brought any new information and that these facts were already known. Nevertheless, that was enough to make CITOH the worst performing stock in the Nikkei 225 and sent its 5-year-risk premium 14bps wider to 57bps, even though it stabilised somewhat today.