HKEx cites tough times for listed firms' troubles

PUBLISHED : Tuesday, 07 August, 2012, 12:00am
UPDATED : Wednesday, 15 August, 2012, 11:07pm


The Hong Kong stock exchange has blamed a recent spate of profit warnings by newly listed companies on turbulent market conditions rather than on any failure of the exchange's listing requirements.

Chow Chung-kong (pictured), chairman of the Hong Kong Exchanges and Clearing, said yesterday at a listing ceremony that the exchange had requested companies to disclose price-sensitive information as early as possible in the light of weakening market and corporate performances.

About 340 companies, or 23 per cent, of Hong Kong-listed firms have issued profit warnings in the past three months. Of those, at least 10 were listed in just the past 12 months, according to data compiled by the South China Morning Post based on HKEx information.

The newly listed companies that warned they might experience sharp decreases in profits or even losses span retailers, consumer product manufacturers, cement makers and electronics producers.

'Because of [economic] challenges, especially in China, a lot of companies have tighter cash flows,' said Edward Au, a partner of international accounting firm Deloitte.

Au said companies using short-term loans to finance long-term debts were facing more trouble.

Many companies that launched big expansion plans in the past two years were unable to trim expenses in the short term, he said.

Many firms cited a fall in demand due to the sharp economic slowdown on the mainland coupled with high raw material prices and operating costs as the main reasons damping their profits. What was more, a volatile stock market was causing trading losses on some companies' investments in shares and derivative products.

Many have also been caught by a flat yuan exchange against the US dollar so far this year and suffered foreignexchange losses, after the yuan's 4 per cent gain last year generated substantial exchange windfalls for investors. The yuan spot rate has depreciated about 1.5 per cent against the US dollar in the first half of this year.

Mainland economic growth slowed more sharply than expected to 7.6 per cent in the second quarter, prompting Beijing to cut interest rates on July 6 for the second time in a month and to encourage infrastructure investments to spur expansion. The central government is targeting full-year growth of 7.5 per cent.

The mainland's central bank said over the weekend that it would step up monetary policy fine-tuning in the current half year to improve credit quality and economic development in the run-up to the 18th National People's Congress.

The comments follow a Politburo meeting led by President Hu Jintao that aimed to promote economic stability and growth ahead of a once-in-a- decade leadership reshuffle set for the autumn.