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Builders' bets cost billions

(China Daily)
Updated: 2008-10-24 11:06

China Railway Group Ltd and China Railway Construction Corp, two of the nation's biggest building companies, reported a combined 2.26 billion yuan of losses, joining Citic Pacific Ltd in making wrong way bets on foreign currencies.

China Railway Group, Asia's biggest construction company, booked a 1.94 billion yuan loss, and China Railway Construction incurred a 320 million yuan loss, the Beijing-based companies said in separate statements to the Hong Kong stock exchange yesterday.

Both companies slumped in Hong Kong trading, extending record declines on Wednesday, amid concern over more foreign exchange losses from cash reserves including recent share sale proceeds. Citic Pacific, a unit of China's largest State-owned investment company, is being probed by Hong Kong securities regulators after it posted HK$15.5 billion in currency losses from unauthorized trades.

"These companies both listed recently, so they had a lot of cash on hand in Hong Kong," said Winson Fong, who helps oversee more than $3 billion at SG Asset Management Hong Kong Ltd.

China Railway Group's loss came from funds raised in its Hong Kong share sale in November, yesterday's statement said. China Railway Group had made $1.5 billion of "structured deposits" to hedge against foreign exchange risks and boost returns, and they had matured by Sept 30, the company said.