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Case Title:

China Aviation Oil's Collapse: Singapore Inc's Challenges

Publication Year : 2005

Authors: Mercy Mathew & Srinath Manda

Industry: Transportation

Region:China

Case Code: GBE0069

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
China Aviation Oil (CAO), voted as the most transparent company listed on Singapore Exchange, had collapsed because of a $550 million loss in speculative oil trading in 2004. This was the second major derivative scandal at the Singapore Exchange. The first one was the collapse of UK's Barings Bank in 1995. The derivatives scandal raised considerable concern on the creditability of Singapore as a secure financial destination, which until then had the reputation of being Asia's best-regulated financial centre. Also, questions were raised about corporate transparency among Chinese companies and the role of independent directors.

Pedagogical Objectives:

  • To discuss to impact of CAO scandal on the credibility of Singapore as to a secure financial destination.

Keywords : China Aviation Oil Corp Ltd, China Aviation Oil Holding Company, Nick Leeson ‘Rogue Trader’, Barings Bank, Derivative scandal, Finance Case Study, Speculative oil trading, Oil swaps, Speculation and straddle, Hedging, Corporate transparency, Singapore Stock Exchange (SGX), Chinese state-owned enterprise, Lee Kuan Yew, Corporate governance, Jet Aviation Fuel Company

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