Public company info - China Assets (Holdings) Ltd. , 00170.HK
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China Assets (Holdings) Ltd., 00170.HK - Company Profile
Chairman LAO Yuan Yi
Share Issued (share) 107,000,000
Par Currency
Par Value 0.0
Industry Investments & Assets Management
Corporate Profile Business Summary: The Principally engaged in the investment holding in Hong Kong and the Mainland China. Performance for the year: The Group’s consolidated net profit for the year was US$12.36 million and consolidated net asset value as at 31 December 2016 was US$204.57 million, representing US$1.90 per share. Business Review： 2016 started with global stock markets adjusting substantially downward, oil falling to US$28 per barrel and investors concerned about the risk of China sharply devaluing its currency. In the summer, the UK’s surprise vote to leave the European Union was the first big shock of the year and led to the resignation of Prime Minister David Cameron. In emerging markets, Brazilian president Dilma Rousseff was impeached and removed from office, driving a rally in Brazilian risk assets. By winter, Donald Trump was US president-elect, Italian Prime Minister Matteo Renzi had lost his job and the European Central Bank had extended quantitative easing further into 2017. OPEC cut production at the end of November and the US Federal Reserve raised interest rates in December. Despite all these, the global economy managed to navigate its way through troubled waters and the major stock markets had a decent year except the China market whose performance lagged substantially behind. Many central banks in the developed world have maintained exceptionally loose monetary policies in an effort to support household consumption and business investment. Eight years after the acute phase of the global financial crisis, the developed world is still using its central banks as a saver. Throughout developed economies, interest rates were at, or close to, record lows and several are experimenting with unconventional policies in the hope of stimulating domestic demand. In China, capital outflows were substantial, leading to a contraction of foreign exchange reserves and pressure on the exchange rate. Expected Renminbi depreciation led the corporate sector to reduce its foreign liabilities and increase foreign assets. Individuals also diversified their asset into foreign holdings. The Shenzhen-Hong Kong Stock Connect commenced operations in December, opening up a new channel for capital inflows. The inclusion of the Renminbi in IMF Special Drawing Rights also boosted demand for Renminbi assets. The combination of these various offsetting forces took the Renminbi down more than 6% against the dollar in the year. China’s economic growth continued to decline very gradually as adjustment in manufacturing sectors plagued by excess capacity gathered momentum and also due to diminished private investment. Capacity cuts in the coal and steel sectors, together with disruptions in the distribution chain due to floods, resulted in regional coal shortages and price hikes. Real estate investment seemed to have bottomed out, although trends in upper and lower-tier cities diverged increasingly, with sharply rising demand and prices in the former, prompting new home-purchase restrictions. In lower-tier cities, working off excess capacity will take several more years. Consumption was robust, with buoyant e-commerce sales. Weak business investment demand weighed on imports and rising costs weighed on exports. Despite all these, with strong support from public infrastructure spending, China achieved a growth rate of 6.7% for the whole year. Although its economy achieved the fastest growth rate of any G20 nation, China’s stock markets were among the worst performing in the world in 2016. Starting with a botched attempt to reduce volatility that instead triggered a spectacular meltdown, Chinese bourses spent the year struggling against a slowing economy, massive capital flight and a declining currency. The benchmark Shanghai Composite Index struggled towards the finish line and down 12.3% for the year, compared to a gain of 13.4% for the Dow Industrial. The share price of Shangdong Lukang Pharmaceutical Co Ltd (‘Lukang’), the Company’s major listed investment, dropped from RMB13.35 to RMB9.71 for the year, a decline of 27%. The U.S. economy was undoubtedly the healthiest among the developed economies in 2016, even though growth was only 1.6%. In Europe, although the economic indicators had been resilient, confidence in the Eurozone continued to be undermined by political risks, the rise of populism to opt-out from the EU and the uncertainty of dealing with Brexit, the lingering immigration crisis, and difficulties in its banking sector. The Group reported a profit of approximately US$12.36 million for the year ended 31 December 2016, compared with a profit of US$11.12 million in 2015. The result mainly comprised of a profit (net of taxation) of US$16.25 million arising from disposal of portion of its equity investment in Lukang. The consolidated net asset value decreased by US$20.26 million for the year to US$204.57 million as at 31 December 2016. The decrease was mainly due to the fall in fair value of Lukang as a result of its material decline in price as well as depreciation of the Renminbi on its mainland investments. The magnitude of the decline was partially alleviated by the new capital raised by the Company under an open offer completed in December. In the first half year, the Company disposed of its investment in Shanghai Moxing Environmental Science and Technology Co Ltd for US$0.91 million, a small company developing oil refining technology and whose performance had not been impressive in previous years. In the second half year, the Company invested in two start-ups, a 9% equity in a limited partnership specializing in the medical industry for US$1 million, and US$1.5 million for a less than 1% stake in a U.S. company developing virtual technology for broadcasting. The Group also advanced RMB 20 million as its prorated shareholder advance to Shanghai International Medical Centre Co Limited to strengthen its funding position. In December, the Company completed an open offer on the basis of two new shares for every five shares by issuing 30,703,264 shares at a subscription price of HK$3.95 per share. This initiative raised approximately HK$118.87 million for general working capital purposes. Prospects: The Company has been quite conservative in the past few years in terms of the pace of its investments in China for various reasons. These include reservations about the sustainability of its economic growth, its restrictive regulations on the health industry which the Company has been targeting, and its restricted use of Renminbi balance under the current foreign exchange regulations. These factors combined have influenced the Company to take a very cautious approach toward committing its usable funds, especially when the targeted asset price level was considered exuberant and not in line with underlying fundamentals or the overall economic environment. With a view that recent valuations of targeted investments have been trending to a more reasonable level, the Group has quickened its pace in concluding or committing to new projects. The aim is to strengthen its investment portfolio in phases and in consideration of its usable and on-hand Renminbi balance. The projects are mainly related to hospitals in Shanghai. As stated in the past, investments will be proceeded with cautiously, especially if there could be dramatic economic impacts on China as a result of the new U.S. administration adopting any policy that is harmful to the relationship between these two economic giants.

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