...Background and Overview CITIC Pacific (CP) is the Hong Kong arm of the CITIC group, China’s largest state-owned investment company. It is publicly traded on the “Hong Kong Stock Exchange”(HKEx). CP’s major businesses are special steel manufacturing, mining of iron ore and property development in mainland China. For the year ending 31 December 2007, Citic Pacific showed a record net profit of about US$1.5 billion, representing a growth of almost 33% over the previous year. However, in 2008, CITIC Pacific’s stock price plunged by 90% within a several months after a foreign exchange scandal that led to a loss of some US$2 billion. This loss was attributed to the unauthorized betting on foreign exchange derivative contracts that were supposedly hedges against currency risks. Details Analysis Timeline On the 20th October 2008, CP announced suddenly that it would lose as much as US$2 billion. Within a day, its share price plunged 55.1% to HK$6.52, and the loss is likely to mount up. Then, two leaders resigned and a new Finance Director was appointed immediately. After that, within two days of the announcement of the potential losses, the Securities and Futures Commission announced that it would be investigating CP. Criticism And this sudden event also caused many queries from the public, one outstanding question was asking for the BOD, people wanted to know why CP company delayed for about six weeks before making the potential losses...
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...Director Frances Yung - Director of Group Finances As of December 2007 , Citic Pacific had four independent directors on its board all of whom confirmed their independence. Slide 3 The forward contracts (AUD target redemption forward contracts and foreign exchange accumulators) were entered as part of an iron-ore mining investment in Western Australia. Since the project’s functional currency and cash flow were denominated in US dollars, the foreign exchange contracts were expected to hedge against any non-US-dollar currency exposure. These contracts, however, had limited profit and an unlimited downside, meaning that there could be colossal losses in the case of AUD depreciation. Slide 4 Citic Pacific announced on 20 October 2008 that it faced losses of up to HK$15.5 billion. The company had been aware that it had suffered losses from misinvestment in a set of foreign exchange contracts six weeks prior to the announcement, but had failed to inform investors of the situation. Citic Pacific’s share price fell by 55.1% within a day of the 20 October announcement,and this fall was vigorously investigated by all sides during the ensuing weeks. Charges and challenges against Citic Pacific’s self-proclaimed to excellent standards of corporate governance and first class business practices. Slide 5 Error in investment decisions and mismanagement Citic Pacific’s finance director was largely responsible for entering into the foreign...
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...EXECUTIVE SUMMARY: The company should decide whether to go ahead with the Citic Tower II project or not. The following alternatives can be used to address the problem: NPV: Net present value (NPV) is defined as the total present value (PV) of a time series of cash flows. It is a standard method for using the time value of money to appraise long-term projects. The method is used for capital budgeting, and widely throughout economics, it measures the excess or shortfall of cash flows, in present value terms, once financing charges are met. OPTION PRICING: The buyer of a call option gets the right to buy the underlying the underlying asset at affixed price, where as the buyer of a put option obtains the right to sell the underlying asset at a fixed price. Alternatives to the binomial model In the binomial option pricing model, the underlying asset and risk free lending or borrowing are combined to create a portfolio that had the same cash flows as the option being valued; we called this portfolio the replicating portfolio. Although the binomial model provides the intuitive feel for the determinants of the option value, it requires a large number of inputs in terms of expected future prices at each node. As we can make time periods shorter in the binomial model, we can make assumptions about asset prices. We can assume that price changes becomes smaller as time periods approaches zero leading to continuous price process. THE BLACK – SCHOLES MODEL: When the price process is continuous...
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...segments. Moreover, Michael Wang can use the stock market index to hedge against his portfolio to minimize risk of investments or to develop derivative products such as index futures and index options. 2. What are the five major Chinese stock market indexes mentioned in the case? Briefly summarize how each index is constructed. The five major Chinese stock market indexes: SSE Composite Index, CSI 300 Index, S&P/CITIC 300 Index, FTSE Xinhua (A) 600 Index, MSCI China A Index. * SSE Composite – Simply includes all listed stocks (A shares and B shares) at Shanghai Stock Exchange. Composite indices are weighted by total number of shares and the base period is the total market capitalization of all stocks of that day. (Base date: Dec. 19, 1990 / Base value: 100) * CSI300 Index – Includes A shares listed at the two exchanges (Shanghai and Shenzhen) in China. Weighted by float-adjusted shares. Stocks that rank top 300 are selected as index constituents considering size and liquidity. (Base date: Dec. 31, 2004 / Base value: 1,000) * S&P/CITIC 300 Index – Includes A shares listed at the two exchanges (Shanghai and Shenzhen) in China. Calculated using a base-weighted aggregate methodology and weight is determined by the float-adjusted market capital of the stock. (Base date: Feb. 27, 2004 / Base value: 1,065.87) * FTSE Xinhua (A) 600 Index – Includes A shares listed at the two exchanges (Shanghai and Shenzhen) in China. Consisting of 600...
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...Yinzhi Miao Oversea Listing and State-Owned-Enterprise Governance in China: the Role of the State LL.M. Long Paper Harvard Law School Supervised by Prof. Reinier Kraakman and Mark Roe April 2012 Oversea Listing and State-Owned-Enterprise Governance in China: the Role of the State Yinzhi Miao Abstract: There are both considerate horizontal and vertical governance problems in the Chinese state-owned-enterprises (SOEs). Due to their privileged positions in the political economy, traditional institutions of corporate governance are far from perfect. Thus the value of oversea listing as a governance mechanism is highlighted, and that could be better revealed by a deeper analysis of the benefit-and-cost balance by the government which controls the SOEs. However, effective as it is, oversea listing could not be a marvelous antidote to all governance ills. Further, as the two major governance disasters of oversea listed SOEs shows, if the government lacks a proper self-positioning, nontrivial negative implications will be brought to SOEs governance via oversea listing. The ultimate function of corporate governance in SOEs thus relies heavily on public governance. Key words: state-owned-enterprises, oversea listing, corporate China governance, 2 Table of contents I. Introduction ....................................................................................................................4 II. The Governance problems of Chinese SOEs and the limitations of...
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...This paper sheds some light on the pros and cons of the proposed joint venture between Otis Elevator Company, CITIC and TEC, and some changes I think may be necessary in the Joint Venture proposal. Exhibit A summarizes the current business overview of Otis and its competitors, which is important to understand the context of the JV and how will a JV in China would be helpful for Otis’s market position. I think this is a good time for Otis to enter the Chinese market. Otis entered China earlier in 1930, and left the country in 1951 due to political instability of the country. A quick timeline of China’s political evolution is highlighted in Exhibit B. The conditions persistent in the country in 1951 are very different from the present conditions in 1983. China has experienced immense growth in all sectors, and the construction industry is booming due to modernization efforts. Even after the death of Deng, I think his successors would encourage foreign investments because all these effort are producing good results in terms of GDP growth, exports, and technological know-how (Exhibits 3, 4 and 5 of the case) for China. In addition to all these, China-Schindler joint venture has proved very successful. This strengthening position of Schindler poses a threat to the market share of Otis. Other smaller players, such as Hitachi, are also entering into agreements with Chinese elevator companies. Also, the JV proposal is for Tianjin, the third largest Chinese city which is also emerging...
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...GLOBAL M&A MARKET REVIEW FINANCIAL RANKINGS 1H 2014 1H 2014 GLOBAL M&A FINANCIAL ADVISORY RANKINGS CONTENTS 1. Introduction 2. Global Market Commentary 8. Global M&A Activity by Region 9. Global M&A Activity by Industry 10. Global Announced Deals 11. Cross Border Announced Deals 12. Global Private Equity Announced Deals 13. North America Announced Deals 17. Latin America Announced Deals 19. EMEA Announced Deals 30. APAC Announced Deals 38. Disclaimer The Bloomberg M&A Advisory League Tables are the definitive publication of M&A advisory rankings. The tables represent the top financial and legal advisors across a broad array of deal types, regions, and industry sectors. The rankings data is comprised of mergers, acquisitions, divestitures, spin-offs, debt-for-equityswaps, joint ventures, private placements of common equity and convertible securities, and the cash injection component of recapitalization according to Bloomberg standards. Bloomberg M&A delivers real-time coverage of the M&A market from nine countries around the world. We provide a global perspective and local insight into unique deal structures in various markets through a network of over 800 financial and legal advisory firms, ensuring an accurate reflection of key market trends. Our quarterly league table rankings are a leading benchmark for legal and financial advisory performance, and our Bloomberg Brief newsletter provides summary highlights of weekly M&A activity and top deal trends. Visit {NI LEAG...
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...Tan Sri Dato Dr Robert Kuok has been the 33rd richest person in the world, Over taking Tan Sri Dato Dr Yeoh Tiong Lay (YTL) , Dato Ananda Krishnan and Dato Brian Tan. Kuok's father arrived in Malaya from Fujian, China at the beginning of the 20th century, and Robert was the youngest of three brothers, born on 6 October 1923, in Johor Bahru. He claims he began in business as an office boy, and later started a business with relatives' support. [2] In fact, upon graduation, he worked in the grains department of Japanese industrial conglomerate Mitsubishi between 1942 and 1945 Kuok senior died in 1948, and Kuok and his two brothers founded Kuok Brothers Sdn Bhd in 1949, trading agricultural commodities. Under the new post-colonial government, Kuok started in the sugar business alongside the government. In 1961, he made a coup by buying cheap sugar from India before the prices shot up. He continued to invest heavily in sugar refineries, controlled 80% of the Malaysian sugar market with production of 1.5 million tonnes, equivalent to 10% of world production, and so earned his nickname "Sugar King of Asia". In 1971, he built the first Shangri-La Hotel, in Singapore. His first foray into Hong Kong property was in 1977, when he acquired a plot of land on the newly reclaimed Tsim Sha Tsui East waterfront, where he built the second hotel, the Kowloon Shangri-La. In 1993, his Kerry Group acquired a 34.9% stake in the South China Morning Post from Murdoch's News Corporation. His companies...
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...ASSIGNMENT: CITIC TOWER II: The Real Option Executive Summary: Structure of Nikkei-Linked Euro-Yen Transactions: Role of Kingdom of Denmark: Risks exposure for Goldman Sachs: 1. Risk of bearing the unsold inventory of NPWs: If the investors find prices too high then much of the inventory would remain unsold and GS will have to bear the costs of unsold warrants. Risk Mitigation: GS would offset its risk through futures position in the Nikkei offered by the Singapore, Osaka & Tokyo stock exchanges 2. Exchange Rate Risks: Considering preference of U.S investors, GS would bear the exchange rate risks for its investors. This implies that GS has to sell NPWs in terms of dollars whereas the same has been purchased by it in terms of yen. Also, in the 1980s, the Nikkei and the yen/dollar exchange rate were moving in opposite direction which further increased its exposure to exchange rate risk. Risk Mitigation: This can be mitigated through Quantos, a product offered by its currency and commodity division. A complete hedge would cost GS about $1 per warrant whereas hedging 80% of its risk would cost it $0.50 per warrant only 3. Repute at risk: GS would not like to keep the prices very low. At the same time it cannot price them very high as there is a risk that competitors might copy the product and start selling it at lower prices. Also, if NPWs started trading at lower prices in the secondary market this would bring disrepute for the organization and...
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...Abstract Over the past 33 years, China has been the recipient of a large amount of foreign direct investment (FDI). As a result of this, capital inflow and technology spillover allowed outward FDI from China. Inward FDI contributes to China’s financial growth and industrial development, tax revenue increases, and improvements in the quality of labor. The contribution of inward FDI to gross domestic product on average is 3-6%. Also, outward FDI improves China’s dynamic competence as well as helps the host countries with capital inflow and infrastructure improvement. Inward FDI Since China has an open and reform strategy, the government created FDI advancement strategies after 1978. In 1978, Coca Cola and Panasonic came into the People’s Republic of China. Before this, many foreign companies were leaving the PRC (Shell in 1966). The open guidelines and market forecasts caused Hong Kong, China; Japan; and the U.S. to start investing. In 1990, FDI influxes to the PRC are at $3.5 billion. The majority of the inflows came from Hong Kong, China; Japan; and the U.S. Hong Kong accounted for 54.9%, Japan for 14.4%, and the U.S. for 13.1%. Since the past 20 years, China’s FDI inflow has matured from $3.5 billion to $100.0 billion. The foundations, purpose, structure, and the goal of the foreign companies that invested have changed radically. Outward FDI After 1976, China’s government allowed domestic entities to create joint endeavors overseas. Most of the endeavors assisted the domestic...
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...In September 2009 the results of PEA were reported. In December 2010 Capstone Mining Corporation updated mineral resources. In May 2011 the Capstone Mining Corporation revised the Project Description to provincial and federal agencies. Sino Iron Project had some major milestones like, in March 2006 the initial mining rights were acquired. May 2006 the CITIC Pacific Mining was formed. In August 2007 the Capstone Mining Company acquired the Mardie Station, in November 2007 the first deliveries of mining fleet at the site. In August 2008 the first construction team formed and in February 2009 the construction started. In July 2013 the first lineup started producing magnetite concentrate, and then in December they made their first shipment to...
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...Chase Bank, worldwide security services division. Our main custody business clients are insurance company, direct invest institutions, bank, pension fund, QDII Fund. JPMorgan is the biggest custody bank in this world owns about 1.12 Trillion US dollars assets. In mainland China, custody is a very new business for JPMorgan starting from 2007. We own the license of QDII which is call the “Qualified Domestic Invest Institution”. From the starting point about 18 Billion RMB custody assets, in 2013, there are more than 80 Billion RMB custody assets in China mainland. Rapid growth is good news for every business but potentially there are potential risk in this competitive industry and JPMorgan is brand new comparing with such old bank: HSBC, Citic group and Standard Charter. Analysis: I use a SWOT model to analyze the current internal/external situation for JPM’s custody business in China. Strength: Advantage of price: Management fee and Custody fee are the main income on the custody services. Such rates are agreed between JPM and investors. However, when there are huge amount of the custody asset from client, such rates can be...
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...CHINA DAILY > Soe Special China Daily China Daily PDF Olympian Olympian PDF HK Edition Business Weekly 21st Century Australian acquisition proves rich seam for SZLN By Chen Jialu (China Daily) Updated: 2009-07-07 07:56 Comments(0) PrintMail With the Australian mining industry particularly hard-hit by the international financial downturn, one enterprising Chinese business has managed to provide a lifeline for one ailing Perth-based metal mining company, whilst also establishing a bargain basement foothold in this hugely lucrative market. The deal came as Perilya Limited, a 22-year old base metal mining company, saw its market value slashed from $1billion in 2007 to a low of just $18 million when it announced its intention to seek new funding. Its value eventually rallied to $30 million, but, despite a raft of cutbacks and lay-offs, its future looked far from certain. Australian acquisition proves rich seam for SZLN Zhang Shuijian: "seeking additional foreign partners". Shenzhen Zhongjin Lingnan Nonfemet Co (SZLN), a Shenzen-headquartered State-owned mining business took the opportunity. Realizing the potential of the struggling Australian company, SZLN invested A$ 45 million (200 million yuan) into Perilya last February and acquired a 50.1 percent stake in the business. The deal marked the first time a Chinese metal company had acquired a controlling stake in an Australian mining business. Following the acquisition, SZLN is now China's largest...
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...Chinese Customer Research 1. Customer Profile * Travelling Purpose 96% Chinese international travellers surveyed have been abroad for leisure reasons, while 52% have been abroad for business or educational purposes. According to the data over the past five years, Chinese international travellers tend to take leisure trips abroad more frequently than business trips, especially for those visiting relatives and friends. * Independently Travelling Preferred 70% of Chinese international travellers now travel independently and only 30% of Chinese international travellers travel as part of the arranged groups. The percentage of those travelled independently increased compared with two years ago. 2. Most Popular Activities When travelling, 51% of Chinese international travellers prefer to go shopping as they seek for luxury brands in USA. Older travellers aged 35+ are more interested in traditional sightseeing, while younger travellers aged under 35 are more interested in dining. In addition, Chinese travellers in tier 1 cities are more likely to go shopping when travelling abroad (57 per cent vs 51 per cent for the total). Activity | Sightseeing | Dining | Shopping | Beaches | Museum | Rural pursuit | Percentage | 75% | 65% | 51% | 37% | 22% | 17& | 3. Booking Methods 49% of Chinese international travellers will book their accommodation directly through the hotel, with 29% among those book on the website and 19% by telephone. 36% travellers rely on...
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...BIOGRAPHY OF ROBERT KUOK Date of Birth: Saturday, 06 October 1923 | Born in: / Nationality: Malaysia | Robert Kuok is a Malaysian billionaire and business tycoon who is currently the richest man in both Malaysia and Southeast Asia, with an estimated wealth of 17 billion dollars. He owns multiple companies in numerous fields of business—from sugar mills to food products, from farms and plantations to hotels and resorts. He is most known for owning the world-class Shangri-La Hotels, a chain of hotel-resorts that now runs over 60 hotels worldwide in cities like Tokyo, Dubai, Manila, Singapore, Kuala Lumpur, Hong Kong, Vancouver, and Paris. THE RICHEST MAN IN MALAYSIA AND SOUTHEAST ASIA Robert is also called the “Sugar King of Asia” for having 80 percent of the Malaysian sugar production, which accounts for ten percent of the total world production, under his control. Robert’s amazing story of rising up from poverty and becoming Southeast Asia’s richest person has become a shining inspiration for a lot of people. Robert is a firm believer of hard work, diligence, and a broad set of thinking. He believes that these traits allow a person to achieve their goals, and enable them to properly set the course of their life. Robert has a deep root in Buddhist and Communist beliefs, in helping others and how everyone has an equal opportunity of succeeding, but is hindered by so much corruption—not just in politics, but a corruption of the entire system of life itself. In his interviews...
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