CITIC Pacific Faces Investigation

Bloomberg reported:

"Citic Pacific faced a formal investigation from the Hong Kong Securities and Futures Commission after predicting HK$15.5 billion ($2 billion) of currency losses from unauthorized trades."
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CITIC Pacific Fell Another 25%

Its market capitalization is down from HK$30 billion a couple of days ago to HK$10 billion now.
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Is CITIC Pacific State-Owned or A Family Business

CITIC Pacific is in big trouble and some market analysts say it's finished.

Yesterday its share price fell by 55% and its valuation is down from HK$30 billion to HK$14 billion.

News media have called CITIC Pacific state-owned. But it's been run like a family business. The wholly state-owned CITIC Group is the biggest shareholder and owns 29% of Pacific, and Larry Yung owns 19%.

Yung is chairman of the board of directors. His son Carl is also an executive director and deputy managing director. His daughter Frances was director of group finance until she was demoted yesterday to take the responsibility of the HK$15 billion loss in a currencies bet.

Although CITIC Group had a 29% stake, its management, led by chairman Kong Dan and president Chang Zhenming, failed to safeguard its interest in Pacific.
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55% Fall of CITIC Pacific

One day after the revelation of a potential loss of HK$15 billion, the stock of CITIC Pacific fell 55% in the Hong Kong Stock Exchange. Its market valuation is from HK$30 billion to HK$14 billion only.

CITIC Group owns 29% of the company, which now values HK$4.1 billion. There is only HK$9.9 billion of the value that the parent company does not already own.

Is it advisable for CITIC Group to loan HK$12 billion to its subsidiary as it's planning to do?
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Who Supervises CITIC Group?

State-owned CITIC Group is one of China's largest investment companies. It is supposedly supervised by the State Council, China's cabinet. But who specifically supervises it? It's not clear. It is like CITIC is a free agent building spiral business empire of numerous financial subsidiaries and non-financial subsidiaries, a very inefficient one at that. The current expected huge loss of HK$15 billion by its Hong Kong subsidiary CITIC Pacific is an example of loose management.

I think it's time to split CITIC Group into two companies, a financial one and a non-financial one. The financial part company should be put under the sovereign wealth fund China Investment Corp. and the non-financial company should be supervised by the State-owned Assets Supervision and Administration Commission.
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Another CITIC Pacific Executive Punished

Hong Kong-based CITIC Pacific expects to lose HK$15 billion. In addition to two board directors resigned, Frances Yung, daughter of board chairman Larry Yung, a director in group finance, was transferred out of the department, to be reassigned.

Larry Yung owns 19% of CITIC Pacific and its parent company CITIC Group in Beijing owns 29% of it.
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CITIC Pacific May Lose HK$15 Billion

Hong Kong-based CITIC Pacific may lose HK$15 billion due to bad bets on currencies. The company had a market valuation of HK$30 billion, and thus it could lose half of its value.

Larry Yung, Chairman of CITIC Pacific, apologized personally and on behave of the board of directors for the loss.

Group finance director Leslie Chang Li-hsien and group financial controller Chau Chi-yin resigned.

The company has taken a loan of HK$12 billion from its parent company CITIC Group, which owns 29% of the listed subsidiary.

If a company loses half of its value, shouldn't more higher-ups resign to take responsibility?
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South Korea Rescues Banks

The Financial Times reports:

"South Korea on Sunday announced a comprehensive rescue package worth about $130bn (£75bn, €97bn) for its banks and companies suffering from a foreign currency liquidity crunch."
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Global Financial Crisis Summit

From CSMonitor:

"When President Bush hosts a world financial summit in the coming weeks, one of the least multilateral American presidents in decades will set in motion what could result in a full reordering of the global financial system."
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Basic Values

In time of crisis - the current global financial crisis, we need to return the basic values that have sustained us over many millenniums. They are basic because they are fundamental as well as simple.

I will say three are among the most basic of these values: compassion, truth, and personal action.

We concern for the misfortune of others because it's our nature. We need truth because it ensures that we are in accord with facts and reality. Personal action is the prerequisite to any solution.
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On The "Brink Of Systemic Meltdown"

IMF chief Dominique Strauss-Kahn said it:

"Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown."
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The US Passed The $700 Billion Bailout Plan

The US Congress finally passed today the $700 billion bailout package for Wall Street after a week of uncertainty. The US President George W. Bush signed it into effect.

Now, Wall Street fat cats get bailed out. But will the plan be effective in curing the credit crisis in the US economy? We'll see.
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Happy China National Day

PRC celebrates its 59th anniversary. This year is also the 30th year after China's reform and opening up.
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