Hong Kong Financial News

From an announcement today, all directors (executive, non-executive and independent non-executive), except one, are the subject of investigation by the SFC. The only one director not being investigated is Peter Kruyt, who is just an alternate director to Mr. André Desmarais.

The entire list of directors being investigated are: Messrs. Larry Yung Chi Kin, Henry Fan Hung Ling, Peter Lee Chung Hing, Carl Yung Ming Jie, Vernon Francis Moore, Li Shilin, Liu Jifu, Milton Law Ming To, Wang Ande, Kwok Man Leung, Willie Chang, André Desmarais, Chang Zhenming, Hamilton Ho Hau Hay, Alexander Reid Hamilton, Hansen Loh Chung Hon and Norman Ho Hau Chong.

January 3rd, 2009 | Tags: 267, CITIC Pacific, directors, SFC investigation | Category: Companies | Leave a comment

After strong push by a group of listed company directors led by David Li, Chairman of Bank of East Asia, the SFC didn’t relent and said that the extended blackout rule will stay. But it will postpone the rule for four more months (the rule will be in effective starting April 09) as a compromise.

This is good news for the minority shareholders. Corporate governance, disclosure and insider trading are definitely a much bigger issue in Hong Kong than in other western markets. Most of the listed companies in Hong Kong are 50% or more owned by the major shareholders and a lot of the companies are not too transparent (particularly in some small caps). In the US, a major shareholder seldom owns more than 20% of a company. Therefore, the major shareholders here in Hong Kong can actually know more a lot more info about their own companies, can control their companies more easily and can manipulate share price of their companies more easily than major shareholders in the western markets. Undoubtedly, with these additional powers to the major shareholders here, there should be added restrictions placed to them in order to provide a more level playing field with minority shareholders.

One interesting fact to note is that David Li, who is leading the effort in ending this extended black out rule, has been tainted with allegations of insider trading this year. He himself has paid a big fine to the SEC in the US early this year to settle the insider trading case of Dow Jones. Even though in the case he ended up not denying or admitting SEC’s allegations, he is tainted in this case and he is definitely not the right person to head up this effort to oppose this rule which is meant to reduce insider trading. It is just like a criminal protesting outside the High Court, asking all laws to be abolished! What a joke!

December 31st, 2008 | Tags: Blackout rule, David Li Kwok Po, Dow Jones, insider trading, SEC, SFC | Category: General Trends | Leave a comment

There were front page advertisements on major newspapers yesterday by a group consisting of 236 HK-listed companies, 6 professional groups (which include prominent figures such as David Li, Bank of East Asia Chairman) protesting against the new extended blackout period on directors’ dealings in their companies’ securities. The amendment will be effective starting 1 Jan 2009 and from 2009 onwards, directors can not deal with their companies’ securities from the end of financial period to the announcement of the relevant results. Currently the blackout only exists in the month before the announcement of results.

Why do they protest only 3 days before the change will be implemented? The proposed changes have been consulted properly (there is a consultation paper on this matter, published back in January 2008) and most listed company directors should know about this proposed change since it has been discussed in the media and there is even a Webb report on this matter back in April 2008 (http://www.webb-site.com/articles/blackout.htm). Somehow they just realized right before the change is implemented that it is against their interests. What are they doing now? They have money, so they spend money to buy front page advertisements on most newspapers to try to badmouth the Hong Kong Exchange, saying that the changes will be “detrimental to Hong Kong’s position as international financial centre”, in the hope that the SFC or the government will stop this new rule. Will the government succumb to these rich people’s demands? I definitely don’t think so and with the government approval rating at its lowest, agreeing to stopping this black out rule change will just further undermine the credibility of the Hong Kong government, in the mind of the general population. I definitely believe that what these listed company directors are doing is just plain stupid.

As to whether their claims have merits or not, I will discuss it tomorrow. Stay tuned!

December 30th, 2008 | Tags: black out rule, david li, Hong Kong Stock Exchange | Category: General Trends | Leave a comment

Not surprisingly, the proposal for issuing convertible bonds to CITIC Group was approved with a high approval rate of 99.9% in yesterday’s EGM! In the meeting, both David Webb and James To were present to ask questions to (at the same time criticize) the Management.

On another note, it seems like Larry Yung Chi Kin will not resign soon. He told journalists that the question whether he will leave CITIC Pacific or not is a question for the shareholders. Will the majority shareholders vote against Larry Yung in the next AGM? Apparently not!

December 20th, 2008 | Tags: 267, CITIC Pacific, David Webb, James To Kun Sun, Larry Yung Chi Kin | Category: Companies | Leave a comment

It was reported that there were around 10 retail shareholders, led by LEGCO member James To Kun Sun,  protesting outside CITIC Pacific’s EGM today. They demanded that the company should delay approving the plan of issuing convertible bonds to CITIC group and accepting the rescue plan put forward, until the SFC has finished investigating the whole accumulator saga. Also, they demanded that the directors in-charge should be personally held responsible for the matter. They were refused entry into the meeting at the beginning, but at the end they were let in.

I am not sure whether delaying approving the measures would help the small shareholders recover their losses. Letting this type of thing dragging on will just create an overhang for the stock price and does no good to the Company. On the other hand, the directors, if they are deemed to have done anything wrong by the SFC, should bear personal responsibilities and resign (and be charged criminally).

December 19th, 2008 | Tags: 267, CITIC Pacific, EGM, James To Kun Sun, Protest | Category: Companies | Leave a comment

CITIC Pacific is up 12.86% today, closing at HKD 8.25. The company has issued an announcement saying that they are not aware of any reason for the huge increase today.

There are actually two possible reasons for the increase. First, tomorrow CITIC Pacific will hold a EGM (Extraordinary General Meeting) for all shareholders for approving the rescue transaction between the Company and its parent, CITIC Group that was revealed back in November (http://www.hkfinancialnews.com/?p=96). There is no doubt that this will be approved tomorrow as it is beneficial to the Company.

Secondly, AUD has actually risen back a lot in the past few days. Currently it is trading at  1 AUD = 0.70 USD, much higher than the rate a month ago at around 1 AUD = 0.60 USD. The accumulator contracts that they have with banks will lose less money. On the other hand, it is the parent company, CITIC Group that will bear the loss if AUD drops further. So rising AUD is, in overall, good to CITIC group, but only neutral to CITIC Pacific. Therefore, rising AUD should not be a logical reason for the share price increase.

December 19th, 2008 | Tags: 267, Australian Dollar, CITIC Pacific, EGM | Category: Companies | Leave a comment

According to filings by First Natural, there has been on-going dispute between First Natural (1076) and Deutsche Bank on an interest rate swap in November. I guess negotiations didn’t help much and according to Apple Daily, Deutsche has filed a claim against First Natural for around USD 16 million (or HKD 124 million) this week. Surprisingly, on the same day, on the trade suspension notice filed by First Natural,  the footnote says “the board of directors of the Company comprises of one executive director: Mr. Yeung Chung Lung; and no independent non-executive director.” There is no explanation on what has happened to the other six executive and non-executive directors. (The six are: Mr. Yang Le (executive), Mr. Ni Chao Peng (executive), Mr. Yip Tze Wai, Albert (executive), Mr. Wong Chi Keung (non-executive), Mr. Lu Ze Jian (non-executive) and Mr. Leung Chiu Shing (non-executive).) Also, the notice filed was hardly professional. It was only a scanned letter, not the usual official format that probably required more time and resources to prepare.

On the surface of it, it seems like these directors are fleeing the company as they probably think that they would have personal liabilities because of the claim filed by Deutsche, if they do not resign fast enough.

I always question whether bankers  have any moral concerns when they sell these type of structured products to corporates or individuals. This interest rate swap in question is a fixed-floating swap. The company receives 8% fixed and the bank receives a variable rate based on “a prescribed formula determined according to the Deutsche Bank Pan-Asian Forward Rate Bias Index”. How would these people know whether this fu*king index will go up or down?

December 17th, 2008 | Tags: 1076, Deutsche Bank, Deutsche Bank Pan-Asian Forward Rate Bias Index, directors disappeared, First Natural, interest rate swap | Category: Companies | Comments (1)

According to Apple Daily, Chow Tai Fook (owned by Cheng Yu-Tung) and Luk Fook (590) have decided not to bid for 3D-Gold Business. The main concern according to the report provided to potential buyers was that there wasn’t sufficient information in 3D-Gold’s most profitable business segment — its mainland wholesale unit.

Furthermore, Chow Tai Fook probably didn’t have much appetite to take up another acquisition. They have bought the mainland operation of Peace Mark (307) already.

December 16th, 2008 | Tags: 3D Gold, 590, 870, Chow Tai Fook, Luk Fook, mainland wholesale unit | Category: 3D-gold, Companies | Leave a comment

According to the press today, there ar two possible reasons for Shaw Brothers privatisation:

1) The obvious reason, and also the official and textbook answer, is because the share price is too low and the major shareholder believe that the company should command a much higher premium than what the current trading price is offering.

2) Shaw Brothers privatization paves the way for future sale of stake of TVB (511). Shaw Brothers owns around 26% of TVB and with Shaw Brothers privatized, Shaw Brothers would no longer need their minority shareholders (since there are no more  minority shareholders) to approve any sale (no more red-tape like shareholders meeting, etc.). Run Run Shaw is over 100 years old now. There has been rumours saying that he is willing to sell his TVB stake in the past few years.

Apart from a 26% stake in TVB, Shaw Brothers’ other notable assets are 50 million cash, a few pieces of land in Clearwater Bay. Opinions differ on how much premium Shaw Brothers would offer to their minority shareholders to buy back the shares. Some people are saying 10% premium (Ming Pao, Apple Daily) and some people are saying over 100% (HK Standard).

December 16th, 2008 | Tags: 511, 80, privatisation, privatization, Shaw Brothers, TVB | Category: Companies | Leave a comment