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China Everbright to launch new hedge, sector funds

Financial group seeks new ways to boost earnings that are down by more than half

PUBLISHED : Wednesday, 22 August, 2012, 12:00am
UPDATED : Wednesday, 22 August, 2012, 4:21am

China Everbright, a holding company for direct investment funds and brokerage operations on the mainland and in Hong Kong, will launch a hedge fund in an attempt to shore up earnings that slumped 51 per cent year on year in the first half.

Net profit dropped to HK$770 million from HK$1.56 billion in the same period last year.

Profit from continued operations, a like-to-like comparison, dipped 26 per cent year on year, mainly dragged down by smaller profit from its 33.3 per cent-owned China Everbright Securities and higher costs at its brokerage subsidiary in Hong Kong.

"I can't see a clear picture for the stock markets in the second half, which will make our brokerage business difficult," Chen Shuang, chief executive of China Everbright, said yesterday.

Chen said the hedge fund business would have an edge at a time when the market was lacking clear direction.

A potential uptick in the mainland's stock markets was in sight in the fourth quarter when the 18th CPC Central Committee's plenary session was concluded, he said.

Besides forming a hedge fund, China Everbright will also launch a new sector fund focused on medicine and the medical sector, with an initial size of 800 million yuan (HK$977.7 million). With a lukewarm stock market, the company said it would trim investment in venture capital and private equity funds, which needed the secondary market for profit, the management said.

Up to the end of June, its private equity arm had a portfolio of US$620 million and venture capital topped 1.24 billion yuan. All of the company's fund operations contributed HK$843 million in pre-tax profit, up 16.6 per cent.

Profit from Everbright Securities amounted to HK$339 million, down 24.5 per cent, while dividend income from Everbright Bank, in which the firm owns a 4.51 per cent stake, was up 43 per cent to HK$267 million.

Chen said plans to list the bank would depend on stock market sentiment in Hong Kong. "Now, I find the market valuation for the banking sector is not attractive enough," he said.

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