Beijing-backed group ran up forex losses of US$1.9b last year
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(HONG KONG) Citic Pacific chairman Larry Yung, once China's richest man, and managing director Henry Fan have quit, the company said.
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| Resigned: Both Mr Yung (above) and Mr Fan (next) are founders of Citic Pacific; it has been speculated that there would be a management reshuffle after the company warned of potential losses |
The Beijing-backed steel to property conglomerate was rocked by foreign exchange losses of US$1.9 billion last year.
Citic Group's deputy chairman and president Chang Zhenming was appointed chairman and managing director, the Hong Kong-listed group said in a statement yesterday.
Both Mr Yung and Mr Fan are founders of Citic Pacific, which was established in 1990.
It has been widely speculated that the Beijing parent, Citic Group, was keen to reshuffle management after its Hong Kong-listed arm warned investors of huge potential losses from unauthorised foreign exchange trading.
'The management change could help lift investor confidence but people would like to know more about whether the company will take further steps to improve its risk management,' said Jaseper Tsang, research director at Capital Securities.
Hong Kong's securities watchdog, the Securities and Futures Commission, has been investigating Citic Pacific in relation to the foreign exchange contracts.
Shares of Citic Pacific, a constituent of the Hang Seng Index, plunged nearly 75 per cent to a 19-year low of HK$3.66 in October after the profit warning and last traded at HK$9.47 last Friday before the stock was suspended.
The shares are up 13 per cent so far this year, beating a 0.6 per cent rise in the index. The company said that trading in the shares will resume today.
Police raided offices of Citic Pacific last Friday, asking the company and its directors to provide certain information regarding the forex contracts. Citic Pacific said that the search was related to an investigation of alleged false statements by company directors and conspiracy to defraud. No charges or arrests were made, it said.
Last October, group finance director Leslie Chang and financial controller Chi Yui Chau resigned after the losses were discovered. Citic Pacific had said that the transactions were not approved by the company and the chairman was not notified of the unusual hedging transactions.
But the company was criticised for a two-week gap between management discovering the losses and reporting them to investors. Citic Group has sent a team to further investigate the foreign exchange loss and other possible irregularities, local media reported.
The parent agreed in November to buy US$1.5 billion worth of convertible bonds from Citic Pacific and assume responsibility for some of its toxic foreign exchange contracts in a bid to bolster investor confidence.
Last month, Citic Pacific reported a record loss of HK$12.7 billion (S$2.5 billion) for 2008, mainly due to a HK$14.6 billion deficit from foreign exchange contracts. -- Reuters
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