Further China Thoughts

I posted about some of the China stocks in MFI last week. At the same time CAST had a secondary offering, which diluted their stock and drove the price down sharply. The question was asked, "if they have cash, why the secondary offering?"

I do not have an answer. But I do have a thought. I actually was speaking with some one who lives in Hong Kong last week. We were talking about differences between Chinese and Americans. He felt one huge difference is the differing views on debt and savings. The Chinese save a tremendous amount of their money, while Americans (as we know) live on credit.

I believe this mentality goes towards companies as well. That is why the Chinese companies carry a lot of cash and little debt. While Americans would argue that this form of financial engineering does not maximize return on equity for stockholders, I have to admit that the American's use a excessive credit isn't working out so well (that is meant to be an understatement).

So my thought, after the long-winded intro, is that CAST didn't use their cash because they like the security of having cash on the balance sheet. I have sent them the question.