CITIC Pac in limbo amid police probe
Updated: 2009-04-07 07:02
By Lillian Liu(HK Edition)
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The CITIC Tower, headquarters of CITIC Pacific in Hong Kong. AP |
HONG KONG: The outlook for CITIC Pacific, whose shares remained suspended from trading yesterday, is grim, say trading analysts. They predict investors would quickly dump the stock once trading resumes.
"(CITIC Pacific) its prospect was not so good last year after the huge loss, now the police raid makes it all worse," said Patrick Chow, a conglomerate analyst at China Everbright Research.
"Investors thought with its parent company's help the company's loss has become bygones now the new wound is added," Chow told China Daily.
The research firm is maintaining its "sell" rating for the Hong Kong-based conglomerate and will revise its target price of HK$7.52 when the company's announcement comes out.
Investment bank Merrill Lynch said CITIC Pacific is "fundamentally weak with more troubles ahead."
"We see no improvement in fundamentals, and reaffirm our cautious view on its cyclical exposure and weak balance sheet," said the US bank.
Merrill Lynch has attached an "underperform" rating for CITIC Pacific and set a target price at HK$4.40.
The stock ended at HK$9.47 when trading was suspended.
CITIC Pacific said in a statement yesterday that trading would remain halted "pending release of an announcement, which is or may be price sensitive in nature."
The company acknowledged over the weekend police raided its Hong Kong offices on Friday as part of investigation into huge foreign exchange trading losses last year. The losses wiped $1.63 billion from the company's balance sheet.
A police spokesman said officials do not comment on individual cases. A spokeswoman for CITIC Pacific also declined to comment.
Trading of shares in CITIC Pacific was suspended on Friday on the Hong Kong Stock Exchange. The company said it had applied for resumption of share trading yesterday.
"There should not be any material impact to the operations of the company as a result of the investigation," CITIC Pacific said in a statement.
The company also emphasized that no charges or arrests had been made by police. It stated the company and its directors were required to hand over "certain information" about foreign-exchange contracts made in 2007 and 2008, as well as company announcements made between July 2007 and March 2009.
Last October, CITIC Pacific lost three quarters of its market capitalization on the day after it disclosed its losses from wrong-way foreign-exchange hedging.
CITIC Pacific said in the following month that its parent CITIC Group would bail it out by agreeing to buy HK$11.62 billion worth of its convertible bonds and absorb a major portion of losses.
(HK Edition 04/07/2009 page16)