Flagship fashion - Hong Kong Institute of Certified Public Accountants

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ZTE seeks more cash with 6 billion yuan in bond sales Company aims to remain competitive in smartphone market ZTE will gain more cash to compete with Apple and Samsung Electronics in the smartphone market as sliding borrowing costs allow it to push ahead with a record sale of debt. China’s second largest maker of phone equipment plans to sell as much as 6 billion yuan of bonds maturing in five years or less. The yield on the company’s 4 billion yuan of bonds due in January 2013 has fallen to 4.09 percent from a record high of 6.22 percent in October. Telecommunications companies globally pay an average of 3.35 percent, Bank of America Merrill Lynch indexes show. ZTE’s cost of borrowing almost doubled last year as Bei- jing curbed lending and raised interest rates three times to rein in inflation, contributing to a 37 percent decline in the Shenzhen- based company’s 2011 profit. Its funding costs rose to 1.37 billion yuan from 728 million yuan, as net cash inflow from financing activities increased to 13.4 billion yuan, more than triple the 4.3 billion yuan from 2010, chief executive officer Shi Lirong said on 29 March. The manufacturer’s planned bond sale would help reduce fundraising expenses by about 100 million yuan annually, Rena Qin, a spokeswoman said. ZTE said it also proposed to apply for renewal of credit lines with the Bank of China for 23 billion yuan and the China Development Bank for US$5 billion. “This is an annual process,” Qin said. Central bank plans liquidity boost as GDP eases The People’s Bank of China said it will boost liquidity in the financial system as the nation’s top four state-owned banks reported a huge net deposit outflow in the first two weeks of April. “Policies will be loosened to boost the economy at the right time,” an official at China’s central bank said on 18 April. “Measures will include issuing more reverse repurchase agreements and lowering deposit requirements for banks.” China’s GDP growth eased to 8.1 percent in the first quarter, the slowest in three years. A laptop equipped with 4G wireless technology by ZTE. The company has been pushing into overseas markets. AFP Liao Qun, chief economist at CITIC Bank International, told The Standard that “time for the reserve requirement ratio cut is ripe,” and that such a measure is expected in the coming months. The mainland’s four biggest state-owned banks reported net deposit outflow of more than 1 trillion yuan in the first two weeks of April, the 21st Century Business Herald reported. New loans given by the four banks narrowed during the same period, the daily quoted an official at China Construction Bank as saying. In Hong Kong, former chairman of the China Banking Regulatory Commission Liu Mingkang warned local banks to carefully examine the accounts of mainland enterprises before lending them any money. “Cash flows of a lot of developers are negative,” Liu said at a forum in Hong Kong on 19 April. As selling prices and transaction volumes of residential units continue to decline, mainland developers are expected to face a harsher time in the second half, he warned. Haitong sells HK$13 billion in share sale Haitong Securities Co. raised HK$13 billion in Hong Kong’s biggest first-time stock sale since December, according to a Bloomberg report. The company, already listed in Shanghai, will sell about 1.23 billion shares at HK$10.60 each, near the bottom of a range marketed to investors, Bloomberg reported. The shares were originally offered at HK$10.48 to HK$11.18 each, according to the prospectus for the offering. Haitong’s share sale is about 40 percent bigger than the total amount raised in first-time offerings in Hong Kong in the first quarter, according to data compiled by Bloomberg. Initial share sales in the city are off to their slowest start to a year since 2009, with investors steering clear of new equity even after the benchmark stock index advanced 14 percent. Haitong is the third-largest publicly traded Chinese brokerage with a market value of 82.9 billion yuan. The country’s two largest brokerages are Citic Securities Co. in Beijing and GF Securities Co. in Guangzhou. Citic raised about HK$1.3 billion in September in a public stock offering. The offer price for Haitong values the company at about 1.31 times its estimated 2012 book value, compared with 1.65 times for Citic Securities’ Hong Kongtraded shares. May 2012 13
SFC launches consultation on rules for IPO sponsors Hong Kong’s Securities and Futures Commission will launch a public consultation that seeks to toughen rules for banks sponsoring initial public offerings, including holding them liable for faulty deal documents. The move is likely to draw strong opposition from foreign investment banks worried about increased risk in a market that has been the world’s biggest for listings in two of the past three years. Mainland home prices down year over year Prices of newly built homes in 70 Chinese cities in March were down 0.4 percent on average from a year earlier, according to The Wall Street Journal. For the first time, prices were down in a majority of the surveyed cities, 38 out of 70. By contrast, in February home prices were up 0.17 percent from a year earlier, with declines in 27 cities. Prices in March were down by an average of 0.29 percent from February. Crude oil futures contract planned, says regulator China plans to offer a crude oil futures contract this year, Guo Shuqing, chairman of the China Securities Regulatory Commission, told the Xinhua news agency. The move could help domestic companies cope with fluctuating oil prices and increase China’s influence over global pricing. China could become the third largest crude futures market in the world after the United Kingdom and the United States, Guo added. Yuan trading band against U.S. dollar up to 1 percent China widened the yuan’s trading band against the dollar for the first time since 2007, an increase to 1 percent from 0.5 percent. In April, regulators raised quotas for foreigners buying onshore stocks and bonds to US$80 billion from US$30 billion and increased the amount of yuan held offshore that can be invested locally. Chinese officials pledged in a five-year plan running to 2015 to keep loosening controls on currency flows. 14 May 2012 NEWS GREATER CHINA Hong Kong-listed Chinese companies, auditors fall out Disagreements over financial data blamed At least six disputes have broken out this year between Chinese companies listed in Hong Kong and their auditors, amid worries that another round of accounting scandals is about to come to light. More than a quarter of Hong Kong-listed Chinese companies that started trading in 2010 have since lowered their forecasts. “Investors have been concerned: Are these companies accurately portraying themselves?” Kevin Pollack, a fund manager at Paragon Capital in New York, told Bloomberg. “There has absolutely been collateral damage. Unfortunately, having big name auditors and bankers behind a company doesn’t guarantee it’s free of issues.” The questions being asked about the accuracy of financial reporting and the quality of due diligence by IPO underwriters have evaporated the investor enthusiasm that encouraged a record number of Chinese companies to go public in stock markets outside China in 2010. The negative sentiment has also contributed to making the first quarter for global first-time offerings the weakest since the depths of the financial crisis. Four Hong Kong-listed mainland companies – including Boshiwa International Holding, a Harry Potter apparel licensee – said their auditors resigned this year because of disputes over financial data or other key information. Two other companies reported that their auditors needed more time to verify earnings. Deloitte China faces tough choice in SEC subpoena of documents Deloitte Touche Tohmatsu said on 11 April that if the Securities and Exchange Commission in the United States forces the firm to respond to a subpoena requesting documents from its Shanghai unit, its employees in China could face jail time and the unit could be dissolved by Chinese authorities. The documents in question relate to potential accounting fraud by one of Deloitte’s former clients, but the firm’s ongoing legal battle with the SEC carries broader implications for accounting and law firms with operations in the mainland. If the U.S. district court rules in favour of Deloitte, it could curtail the ability of the commission to gather evidence in China. If the SEC prevails, firms could be forced to choose between crossing U.S. regulators or Chinese authorities, a point hammered home in court papers filed by Deloitte. “If [Deloitte’s Shanghai unit] were to defy the [China Securities Regulatory Commission’s] command and produce the work papers directly to the SEC, the severest of sanctions could be imposed on DTTC [Deloitte Touche Tohmatsu CPA] and its personnel: China regulators would be authorized to dissolve the firm entirely and to seek prison sentences up to life in prison for any DTTC partners and employees who participated in the violation,” the Deloitte documents said.
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Page 5 and 6: Disciplinary findings Chan Wing-kui
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Page 27 and 28: Energy 32 May 2012 THE PRICE OF POW
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Page 39 and 40: 114 TechWatch The latest standards
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