Citic's Problems Blows Right Open!

Posted last year David Webb's Time-Bomb Warning On Citic Pacific Should Not Be Dismiss and also early this year Citic Pacific's Chairman And MD Face Securities Probe.

Flashback of David Webb's article last October.

• It turns out that little old ladies buying minibonds aren't the only ones to have been taken in by structured financial products. Hang Seng Index member (for now) CITIC Pacific Ltd (CP, 0267.HK) stunned the market this evening with the extremely late announcement that they are sitting on realised and unrealised losses of HK$15.5bn (US$1.99bn), due to foreign exchange exposures the Company was aware of six weeks ago (although the losses have grown) but had failed to tell investors until now.

On today's Edge Financial Daily Auditor finds irregularities at Citic Securities, shares fall. ( Citic Securities which is China's BIGGESTbrokerage company and Citic Pacific is the company's listed unit in Hong Kong)

• SHANGHAI: Citic Securities Co said today that state auditors had discovered some irregularities at the firm, sending shares of China's biggest-listed brokerage tumbling.
  
  China's National Audit Office spotted problems in Citic Securities' financial treatment of incentives related to its brokerage business, the Beijing-based company said in a statement to the Shanghai Stock Exchange.
  
  The irregularities occurred in 2007, before related rules were published, and would not have any impact on the company's performance or published results, it said.
  
  In a routine check last year, state auditors also uncovered irregularities at Industrial & Commercial Bank of China (ICBC) and China Construction Bank (CCB), according to separate exchange filings. Corrections had been made and the findings had no impact on business, both lenders said.
  
  Citic Securities shares fell nearly 5% at one point before closing 2.88% lower at 28.32 yuan (RM14.69). That compares with a 0.12% dip in the benchmark Shanghai Composite Index.
  "The impact of such problems should be short-term and negligible. The market is over-reacting," said Tian Liang, analyst at Ping An Securities Co. "We're optimistic on the future performance of the company, which would benefit from big stock market turnover and upcoming initial public offerings (IPOs)."
  
  ICBC shares rose 1.31% and CCB shares ended up 3.31% in Shanghai, lifted by a broader rise in banking shares.
  
  Citic Securities shares have gained more than 50% this year, as the stock market rallied and trading volume surged. Citic Securities also stands to benefit from China's resumption of initial public offerings this month.
  
  Next year, big companies such as Agricultural Bank of China and China Mobile may sell shares publicly in China, potentially giving Citic Securities a boost in underwriting revenue, analyst Tian said.
  
  Citic Securities' problems were found in a state audit conducted between March and June last year at its parent Citic Group, China's biggest financial conglomerate.
  
  The inspection came after the group's Hong Kong-listed unit, Citic Pacific, posted US$2 billion (RM7.1 billion) in losses from unauthorised bets in volatile foreign exchange markets.
  
  In addition to Citic Securities, irregularities were found at some other units of Citic Group, the statement said.
  
  Citic Securities' problems occurred in 2007, before the government published rules in April 2008 to regulate the country's brokerage business, the company said in the statement.
  
  "We paid high attention to the government audit, and actively cooperated," Citic Securities said. "We corrected our mistakes as we were being audited." — Reuters