主题：再谈中航油 - 兼答酋长 -- 禅人

I think it is an isolated case, or some risks investors already factored into. Such weaknesses in internal control and governance exist in most China's enterprises (not only state-owned but also private). It will take years to cultivate the ideas of "responsibility to shareholders" to managers in Chinese enterprises. While the feeble system itself gives opportunities for manager to abuse their authority, they can hardly make such gigantic losses or siphon lots of money if they have no access to external credits that fuel or even encourage the speculations.

If CAO had not had such a big trading or counterparty limits by investment banks, exchanges or other investors, how could it make such a tremendous exposures in derivatives ? All derivative contracts have counterparties who are supposed to assess CAO's risk limits before entering into trading contracts. Given generally mediocre risk management system and internal control, they should be more than prudent in evaluating CAO's trading limit. However, investors tend to have a moral hazard on exposures to Chinese enterprises. They always expect Chinese government to step in to bail out. It happened in the collapse of Guangdong Enterprises but the lesson learnt has not prevailed in the memory of investors. I believe that Chinese government wants to get rid of the moral hazard, and they are more inclined to bail out domestic listed or registered companies, than safeguarding the foreign investors' interests in overseas listed companies. It is proven in their bail out history (they bailed out a number of brokerages in past two years, and everybody knows their support in state banks) and it is politically more correct.

Given that it is an isolated event, and CAO is not effectively an oil & gas company (but an import agent for jet fuel, I don't think it will affect the government policies. CAO is actually related to Bureau of China Aviation, the ultimate owner of airports and airlines. Temasek will likely be a white knight and it will end up opening this sector to foreigner. The interesting point is to see if Temasek can get majority control in the restructuring (if Sigapore banks suffered the most, then the probability is higher).