$2b forex losses

China's conglomerate CITIC Pacific became the latest victim of global financial market turmoil yesterday after warning of potential foreign exchange losses of nearly $2 billion and accusing its senior finance director of trading without approval.

Mark-to-market losses from leveraged foreign exchange contracts amounted to a whopping HK$14.7 billion - or nearly $2 billion and a third more than its net profits in 2007.

CITIC Pacific, once a favourite among investors because of its state backing and government-invested pedigree, plans to make a major provision that will drag the company into the red for 2008, Chairman Larry Yung told reporters.

Company executives stressed that the company was experiencing no cash-flow problems, but admitted to the need to tighten internal supervision and controls.

HKMEx investors stall

Companies seeking to be members or invest in the Hong Kong Mercantile Exchange (HKMEx) have asked for more time as they grapple with the financial crisis but have not withdrawn from the plan, a top HKMEx official said yesterday.

The commodities exchange's first contract, for fuel oil, is being finetuned while it seeks alternative delivery points, said president Thomas J McMahon.

Despite the slowdown, the contract remains on target to launch in March 2009, he told Reuters ahead of the annual Asia-Pacific Petroleum Conference.

When the HKMEx was announced in June, it flaunted a list of potential investors and members that included investment banks such as now-bankrupt Lehman Brothers, and Merrill Lynch, which has since agreed to merge with Bank of America, as well as Barclays Capital.

Others included brokerages Cantor Fitzgerald and MF Global, and diversified commodities trading firm Noble Group. But Reliance Money, a unit of India's Reliance Capital, said last week it bought a 15 percent stake in HKMEx.

China Mobile's Q3 profits

China Mobile Ltd unveiled a 26 percent jump in quarterly earnings yesterday as the world's largest wireless carrier grabbed market share from Unicom, but then disappointed investors with a sharp drop in growth.

China Mobile's third-quarter performance lagged expectations as the nation's economy slows and competition heats up, pressuring margins. Its showing also paled in comparison to the 51 percent growth chalked up in the second quarter.

Global markets are reeling from their worst financial crisis since the Great Depression, helping take the shine off telecoms operators' bottom lines.

HK interbank rates fall

Hong Kong interbank interest rates fell across the board yesterday as credit market sentiment improved, helped by an injection of funds from the territory's central bank.

The one-week local interbank rate was quoted at 1.75/2.00 percent in late afternoon, falling from 2.00/2.50 percent on Friday. The one-month rate was quoted at 3.40/3.50 percent, down 50 basis points from Friday.

The three-month interbank offered rate (Hibor) was fixed at 3.66071 percent at 0321 GMT, its lowest level since Sept 30, compared with 4.19214 percent on Friday.

The interbank cost of borrowing US dollars eased after governments worldwide recently took aggressive steps to unclog stress in money markets.

US dollar pressure eased further on Monday.

In the spot market, the Hong Kong dollar was trading at 7.7572/75 at 0900 GMT, off an intraday lows of 7.76, but barely changed from late Friday trade in Asia.

Reuters

(HK Edition 10/21/2008 page2)