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Investors demand compensation

By Hui Ching-hoo (China Daily)
Updated: 2008-10-29 09:42

A group of angry Citic Pacific shareholders yesterday in Hong Kong asked the company to buy back their shares after it delayed the disclosure of its HK$15.5 billion loss from currency trading.

File photo shows people inquire at a Citic Pacific booth at an industry fair in Shanghai. [China Daily]

About 80 Citic Pacific shareholders called for assistance from local legislators on Sunday, complaining that they felt duped by the delayed disclosure of the firm's forex loss and hoped to get their money back.

Legislators said they have set up a special taskforce to monitor the incident and will urge Financial Secretary John Tsang to investigate Pacific Citic's internal controls.

One of the investors, surnamed Cheung, who has 25,000 Citic Pacific shares, asked the company to buy back stock purchased by individuals between Sept 7, when management first became aware of the crisis, and Oct 20, when they revealed it to the public.

Citic Pacific's share price plunged over 50 percent after the company made the loss public, closing yesterday at HK$4.23. Around 70 percent has been wiped off its market value since Oct 20.

"If I had known the company had financial problems, I wouldn't have bought 5,000 Citic Pacific shares on Sept 10," said Cheung. "Citic Pacific should buy back the shares bought during this period."

A retired civil servant, who bought 10,000 Citic Pacific shares on Oct 15 for HK$160,000, said: "I chose Citic Pacific because of its stable financial fundamentals."

"I originally purchased the stock because of its handsome dividend payment, but I've made a significant loss as a result of the scandal," said Ho, another Citic Pacific investor.

Terence Chong, associate professor at the Chinese University of Hong Kong, said Citic Pacific may be fined or issued with a warning if any wrongdoing is found in how it handled the disclosure.

"However, it still remains unclear whether the shareholders can receive compensation. I doubt whether Citic Pacific is financially capable of buying back the shares from retail shareholders even if it is ordered to do so."

"The company may then be forced to liquidate," he said.

The Securities and Futures Commission and Hong Kong Exchange and Clearing earlier said that they are looking into the case to see whether it involved any violation of listing rules.

Citic Pacific bet that the Australian dollar would rise, incurring losses after the currency tumbled 30 percent against its US counterpart from a 25-year high reached in July.