Citic Pacific took investors by surprise by announcing a move into financial services and biotechnology. The company already has investments in telecommunications, aviation, property and infrastructure. It said it was establishing a financial investment venture to expand its involvement in Hong Kong's capital market and enter the mainland. The company said it would also invest 350 million yuan (about HK$328 million) for a 51 per cent stake in Shanghai CP Guojian Pharmaceutical, a new joint venture formed with mainland-based Shanghai Lansheng Guojian to develop drugs for cancer. Chairman Larry Yung Chi-kin yesterday said: 'Citic Pacific, together with parent China International Trust & Investment Corp [Citic Beijing] and [affiliate] Citic Ka Wah Bank, have established a joint venture - Citic Capital Markets Holdings - in which Citic Pacific will have 50 per cent interest.' The two other partners will each have 25 per cent stakes. 'While based in Hong Kong's investment banking and brokerage sectors, Citic Capital Markets Holdings will focus on the China market,' Mr Yung said. The diversification was unveiled as the company announced a year on year 36 per cent drop in net profit to HK$2.11 billion for last year, at the low end of analysts' forecasts. The company recommended a final dividend of 60 HK cents. The profit fall was blamed on a smaller contribution from 25 per cent-owned Cathay Pacific Airways, which earlier this month reported an 87 per cent slump in net profit to HK$657 million. Its mainland food business also reported an impairment loss of HK$75 million for fixed assets during the year. Analysts said the bottom line was not surprising considering the company's new diversification. They cast doubt on the red chip's investment strategy. An analyst at a US investment bank said: 'My view is I don't think they have a view. The company is going a little bit far with diversification. It is difficult to digest [that] the company is turning from a telecoms-property play to a banking and drugs play.' Since the formation of a consortium with parent Citic Beijing to invest in a mainland fibre-optic network in 2000, the company had been emphasising its confidence about its China telecoms business. However, in January this year, it announced a proposal to dispose of its 80 per cent interest in the network to its parent because it had failed to get a licence from Beijing to operate it. The proposal was approved by shareholders last month. Mr Yung yesterday said telecoms remained a core focus. Last year's contribution from telecoms business was three times that of the preceding year, reaching almost HK$300 million, Mr Yung said. He said the fast-growth IDD wholesaler Citic Telecom 1616 was the earnings driver. Mr Yung said the telecoms business would see high earnings growth this year, but financial services was also a core focus. 'The new venture is aimed at developing a leading brand name in the China-focused fund management business, as well as developing the existing business of brokerage and corporate finance,' he said. Managing director Henry Fan Hung-ling said it would enter the mainland brokerage market, when rules were relaxed. The sector is closed to foreign investors. Mr Fan said the aviation business was making efforts to participate in the Air China restructuring, but he did not reveal how it would take part. He said the company had held talks to take a stake in Sichuan Airline, but the plan had been called off. It has been reported that Citic Pacific is a potential investor in China Three Gorges Electric Power, a proposed shareholding company to be formed by the builder of the mainland's controversial hydroelectric dam. However, Mr Fan said the likelihood of investing in the giant power unit was slim.