Citic Pacific, a unit of mainland conglomerate Citic Group, drew heavy criticism yesterday for poor corporate governance and risk control after it disclosed a potential HK$15.5 billion loss from unauthorised foreign-currency trades.
Shareholder activists and website editor David Webb said Citic Pacific should have informed shareholders soon after uncovering the exposure on September 7.
'Why, if the management knew about the exposures on September 7, did they only inform the market six weeks afterwards,' Mr Webb said. 'This is not excusable ... it is a surprise given its blue-chip status.'
Citic Pacific management's explanation that the delay was due to the need to investigate what happened was not a defence, he added. They should have revealed the exposure and then conducted a probe.
'They said the group finance director failed to follow the company's hedging policy, but what is the policy? Why did the company enter into such exotic contracts with limited upside but unlimited downside?'
He said such price-sensitive information should have been disclosed as soon as possible under directors' disclosure obligations arising from listing rules.
The company's shares have slumped 41.69 per cent since September 7, sharper than the Hang Seng Index's 23.13 per cent dive, raising concerns about insider trading.
