CITIC Pacific under probe over losses

  • Business
  • Thursday, 23 Oct 2008

Late disclosure of unauthorised currency trading blasted

HONG KONG: Hong Kong’s securities watchdog has launched a formal investigation into steel-to-property conglomerate CITIC Pacific after politicians and market-watchers blasted it for its belated disclosure of potentially US$2bil in losses from unauthorised currency trading.

A Hong Kong stock exchange spokesman, meanwhile, told Reuters yesterday the exchange had received 10 inquiries and complaints relating to Beijing-backed CITIC Pacific and would follow up the case on whether the company had disclosed information properly.

CITIC Pacific stated in a circular dated Sept 16, or nine days after the company discovered the unapproved trading, that it was not aware of any material adverse change in financial or trading position of the group since end 2007.

“It appears that the circular contained a false and misleading statement,” David Webb, a shareholder activist, said on his website.

The Securities and Futures Commission (SFC) confirmed yesterday that a formal investigation had been launched into the affairs of CITIC Pacific. It gave no further information.

The headquarters of the Citic Pacific Ltd in Hong Kong. - AP

Investors dumped shares in CITIC Pacific, which was down by two-thirds in the two days through yesterday.

The company warned after the close of trading on Monday of realised and unrealised losses from leveraged foreign exchange contracts of HK$15.5bil (US$1.9biln) or nearly a third more than its net profit in 2007.

The stock closed down 25% yesterday at HK$4.91, the lowest since January 1991. It underperformed the blue chip Hang Seng Index, which ended down 5.2% yesterday.

CITIC Pacific, which owns 17.5% of dominant Hong Kong airline Cathay Pacific Airways, is headed by tycoon Larry Yung, who once topped the Forbes magazine list as mainland China’s richest person.

The unexpected losses triggered a raft of analyst and credit agency downgrades. One analyst blamed the company’s “cowboy” hedging policy and another said it would take a long time for its reputation to recover.

CITIC Pacific’ Beijing-owned parent, CITIC Group, had agreed to arrange a US$1.5bil standby loan facility to the company and CITIC Pacific also planned to sell its stake in trading firm Da Chong Hong Holdings for cash.

Da Chong Hong is worth US$297mil, and CITIC Pacific owns about 57% of it.

The news also led to concerns over potential losses at other Chinese companies.

Shenzhen-listed Shenzhen Nanshan Power warned yesterday that company officials had signed oil derivatives contracts without the firm’s approval.

Analysts said the contracts are still in the money but warn that risks increase as international oil prices fall. - Reuters

Latest Financial Meltdown, NYSE, NASDAQ and other business news, pictures, videos, audios and charts from the AP-Wire

For latest MSEB indices, charts and other information click here

New York Exchange:

Nasdaq Stock Market:

Hong Kong Stock Exchange

Japan's Tokyo Stock Exchange

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3

Did you find this article insightful?


Next In Business News

Genting registers RM1bil loss in 2020, flags highly uncertain year ahead
LBS Bina Q4 profit up, sales exceed full year target�
AirAsia Group delays releasing earnings to end-March
S P Setia exceeds targeted sales amidst Covid-19 pandemic
I-Bhd stays profitable in 2020
IJM Corp posts stronger 3Q results, net profit at RM144m
SKP reports higher Q3 profits, warns sales impacted by Covid-19�
Buoyant markets fuel Kenanga Investment Bank record profits�
MRCB records revenue of RM1.2b in FY20, improved performance in 2H
Paragon Union minorities advised to reject offer

Stories You'll Enjoy