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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (4291)	1/31/2005 4:14:23 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

Haitong, 2 Other China Brokerages Unveil $800 Mln of Losses Jan. 31 (Bloomberg) -- Haitong Securities Co., Shenyin Wanguo Securities Co. and Guotai Junan Securities Co. reported accumulated losses totaling more than $800 million after China forced the brokerage industry to come clean about its financial condition. The deficits, disclosed in reports filed with China's interbank market that were seen by Bloomberg News, follow the introduction of new accounting rules that require brokerages to recognize past trading losses and declines in the value of stock investments. The reports by three of China's biggest brokerages suggest the industry's losses from a four-year stock market slump have been understated. China's about 130 securities companies lost money for the past three years running as the benchmark Shanghai composite index fell to little more than half its 2000 high, according to the Shanghai stock exchange. ``The problems of China's securities industry are much worse than their financial reports show,'' said Wu Chuanyan, a banking analyst at Everbright Securities Co. in Shanghai. ``There are many smaller companies that do not publish reports. And the whole industry is unprofitable.'' Haitong, the nation's biggest brokerage by net assets and a partner of Belgium's Fortis, had a 2.96 billion yuan accumulated loss as of the end of last year, according to the unaudited report. Shenyin Wanguo, which has a fund venture with BNP Paribas SA, posted a 2.84 billion yuan loss, while Guotai Junan's was 986 million yuan. The losses were booked as adjustments to earnings posted in previous years, enabling all three brokerages to report they were profitable in 2004. None of the three companies is publicly traded. Increased Scrutiny ``China's securities industry is immature,'' Haitong Chairman Wang Kaiguo said in an interview last week. ``Companies put too much money into proprietary trading. In the boom years, brokerages weren't adequately prepared for the market slump.'' China's securities regulator is increasing scrutiny of an industry that's been riddled with allegations of corruption and misuse of investor funds. The regulator this month ordered an audit of all the nation's brokerages, telling companies to submit reports detailing problems and proposed solutions by the end of April. The brokerage industry was last profitable in 2000, when combined net income totaled 16.2 billion yuan and the Shanghai composite index rose 52 percent, according to the Shanghai exchange. ``I'm surprised that such big names in China's securities industry have had such big losses in the past,'' said Stephen Green, senior economist at Standard Chartered Bank in Shanghai. ``It shows that the China Securities Regulatory Commission is getting serious about unearthing historic problems that have been buried away.'' Accounting Rules Hong Yuan Securities Co., China's first publicly traded brokerage, said today it will probably report a fourth straight annual loss for 2004. Hong Yuan, which lost a combined 249 million yuan between 2001 and 2004, said it expects to report a 190 million yuan loss for last year. The company's shares fell by the 10 percent daily limit on the Shenzhen stock exchange. Under the new rules imposed by the Ministry of Finance, brokerages were told to make provisions for eight items, including losses from proprietary trading and declines in the value of long- term investments and fixed assets. ``Chinese brokerages made huge losses in the past few years, mainly in asset management and proprietary trading, that weren't reflected in their bottom lines,'' said Gu Lingyun, a fund manager at Orient Securities Co. in Shanghai. ``Now, the government is asking the industry to admit these losses. It's not confined to one or two companies, it's an industrywide problem.'' Industry Cleanup China's 57 biggest brokerages posted combined losses of 680 million yuan last year, not including prior-year adjustments made because of the new rules, according to a statement from the interbank market cited in the Shanghai Securities News. The securities regulator this month pledged to clean up the brokerage industry as the Shanghai and Shenzhen composite indexes slumped to more than six-year lows. The indexes were the world's worst performers last year among major benchmarks tracked by Bloomberg, dragged down partly by allegations of malpractice at failed brokerages such as Hantang Securities Co. Haitong Securities had net income of 1.87 million yuan in 2004, according to its unaudited report. Shenyin Wanguo posted net income of 19.4 million for last year and Guotai Junan 53.1 million yuan. bloomberg.com