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Public company info - China Assurance Finance Group Ltd. , 08090.HK
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China Assurance Finance Group Ltd., 08090.HK - Company Profile
Chairman PANG Man Kin Nixon
Share Issued (share) 1,768,000,000
Par Currency Hong Kong Dollar
Par Value 0.01
Industry Other Financials
Corporate Profile Business Summary: The Group is primarily engaged in the business of providing corporate credit guarantee services, performance guarantee services and the relevant consultancy services to small and medium enterprises in Hebei Province and Xiamen Province of the PRC. Performance for the year: For the year ended 31 December 2017, revenue of the Group was approximately RMB16.35million (2016: approximately RMB676.12 million), representing a significant decrease ascompared to 2016. Loss before income tax for the year ended 31 December 2017 was approximatelyRMB391.61 million (2016: profit of approximately RMB62.80 million). Loss attributableto owners of the Company for the year ended 31 December 2017 was approximately RMB222.65 million (2016: profit of RMB116.08 million). Business Review: The Group commenced its commodity exchange business in China since 2015 when theGroup acquired a majority stake in JDP and continued to expand in 2016 when it acquireda majority stake in NCCE.. Since the second half of 2016, the CSRC, in conjunction with the local provincialgovernments, commenced a series of informal reviews in the entire commodity exchangeindustry, i.e. all commodities exchanges (some 1200 nos), in China. The purpose of thereview is to ensure that the various types of trading modes practiced in the commoditiesexchanges were appropriate. On-site inspections were carried out. Contracts, financialand accounting records and all relevant documentary evidence of proper carrying outof procedures were checked. Computer and trading records were examined, and internalcontrols practices were checked to see whether they were executed accordingly. Alloperations carried out by JDP and NCCE were found acceptable by the respective localprovincial government authorities. Unfortunately, despite the fact that there were quite some commodities exchanges(including JDP and NCCE) were operating appropriately, CSRC still found that a formalnation-wide mandatory review, together with respective local provincial government wasnecessary. Such mandatory review commenced during 2017. This mandatory review carried the unfortunate request that ALL commodity exchangesshould wind down ALL its business operations, pending for the conclusion of themandatory review. The mandatory review would repeat the work of the previous informalreview, irrespective of whether the commodity exchanges’ trading practices had been foundappropriate and satisfactory previously. Accordingly, JDP and NCCE complied and startedto wind down during 2017. The Group has also taken the opportunity to review its focus of efforts and consideredthat it should consolidate its manpower, expertise and resources in JDP and NCCE tominimise duplication of efforts. This was in preparation for the revival of businesses inNCCE after the CSRC and Guangxi government mandatory review. This shall allowthe Group to focus all its strength in developing the commodities exchanges network inASEAN countries which shall bring in more revenue in due time. As such, the Group madea provision of impairment loss on intangible assets of JDP in the consolidated accounts.This shall make the Group’s accounts more trim and tidy in future. During 2017, the Group and NCCE had been liaising closely with the Guangxi governmentauthorities to conduct the mandatory exercise, with a view to revive the business activities assoon as practicable. NCCE had been reassured repeatedly that its trading practices carriedout in the past had been in compliance with the government policies and its proposedbusiness and trading operations in China and in the ASEAN countries are appropriateand that its revival of business should be endorsed at the time when the mandatory reviewfor Guangxi is completed. However, the purpose and target of the mandatory review was for the entire commoditiesexchange industry in Guangxi and NOT for individual institution per se e.g. NCCE. It wasnoted that, subject to the findings of the mandatory review for certain relevant commoditiesexchanges, some might be requested to merge or cease operation. NCCE is not requiredto undergo merger and closure. Regrettably, the mandatory review of Guangxi has not been completed as at the dateof this announcement. It should be noted that the time taken in Guangxi is longer thanit is expected and intended. Other provinces, such as Shandong, already completed themandatory review in September 2017. It is not a practice for the Guangxi government authority to issue any official sanction toany relevant individual institution e.g. NCCE per se before such overall mandatory reviewis completed, with proper follow up rectification actions on other unsuccessful commoditiesexchanges are put in place. Unfortunately, the completion time is not a subject that theGroup and NCCE could exert any more efforts to expedite the process as it had alreadybeen done so. As a recognised national commodities exchange, NCCE has many intrinsic advantagesover any other commercial institutions. During the current year, although the Grouphas made a provision for impairment loss on amounts due from related parties totaledRMB52.74 million, the management of the Group is confident that once the businessof NCCE is reinstated after the mandatory review, the amount shall be recovered. TheGroup should continue to press the Guangxi government authority to expedite the entirecompletion of the mandatory review process and, if not, to sanction, in stages, to thosewho are satisfactory as partial completion of the process. Mr. Pang Man Kin Nixon, thechairman of the Board, had already taken this matter, in his personal capacity of Guangxigovernment Consultative Member (which he assumed in January 2018), to represent theentire Commodity Exchange industry in Guangxi to press for a more satisfactory resolutionof this matter. Hopefully, this added political pressure would make a difference. Nonetheless, the uncertain situation of NCCE remains and is, of course, unsatisfactory. It should be noted that all businesses, contacts and operations had been originally designedand organised around the setting of NCCE, such as centralised clearing and settlementsystem with banks. It takes extra time, negotiation and efforts to re-model the operationwhile maintaining the original set up intact, with a view to fully utilise the full capabilityof NCCE in due time. That said, the Group had contemplated and assessed the fluidityof the situation and had taken any suitable remedial and stop gap measures, as necessary. The Group had started in 2017 contemplating DXZYB, the subsidiary of the Company,to be a general trading agent and foreign exchange settlement company in Dong Xing,Guangxi, a place adjacent to Vietnam border. Dong Xing is the most active venue forChina-Vietnam border trade, amongst the 26 designated sites in Guangxi. DXYB inconjunction with NCCE, could utilise the special trade and foreign exchange policies (onlyspecifically allowed for the designated border residences) to carry out cross border tradeand foreign exchange settlement in Dong Xing, Guangxi. The Group has renegotiated andmade necessary arrangements with other commercial institutions such that this cross-bordertrading operations could commence without the involvement of NCCE for the time being.It is expected that such business activities could commence before mid-2018. Likewise, the Group has re-prioritise its attention to the development of other commoditiesexchanges in the ASEAN countries. APCM was originally intended to take a complementaryrole of NCCE. Given the uncertainty of NCCE, in 2017, the Group has now taken aview that the operation of NCCE and APCM should be independent of each other, eachwith different focus. APCM has the advantage of close contact with the global Muslimpopulation and there is a distinct demand on halal food. This is a large niche market ofwhich no institution had taken any serious efforts aggregate the supply of food ingredients.APCM is making an effort to assume this super connector and conductor role of halalfood in the world. The Group is vigorously pursue this matter and hopefully to realisethis potential in the second half of 2018. The Group has continued to take actions to establish commodities and future exchanges inASEAN countries such as Myanmar, Malaysia, Vietnam, Thailand and Cambodia and thelike, subject to maturity of opportunities. The progress in this front has been encouraging(please refer to the relevant announcement of the Company dated 8 March 2018). The Group has also taken steps to enhance the value of trading in the commoditiesexchange by providing dynamic information and intelligence (space, movement, climaticand soil) related to the individual commodity concerned. These information might forma definitive evidence to indicate property rights, estimation of production volume, tracingof origin and quality grading of the commodity. When utilised together with the tradinghistory and trends of this individual commodity of concerned in the commodity exchange,a creditable commodity index could be made to serve the traders therein. The Group hasbeen taking steps in realising this goal (please refer to the relevant announcement of theCompany dated 12 February 2018). At the same time, the Group recognised that with the many enrolled members registeredin JDP, NCCE, APCM and many other commodities exchanges to be established in theASEAN countries, there is a potential investment service that it can offer as Hong Kong isone of the most active financial center in the world. These members have a strong demandto invest into financial products to either hedge or to manage their wealth. Given thisexclusive access to this group of investors, the Group entered into the sales and purchasesagreement to acquire approximately 102.5 million ordinary shares of Great Wall SecuritiesLimited (“Great Wall Securities”), representing approximately 63.97% of the issued sharesin Great Wall Securities in 2017 to realise this potential (please refer to the announcementof the Company dated 11 April 2017). Written approval for the acquisition has been issuedby the Securities and Futures Commission (“SFC”) on 28 February 2018. Upon completion,the Group will be the largest shareholder of Great Wall Securities. Great Wall Securitiesis licensed under the Securities and Futures Ordinance, may carry out Type 1 (dealingin securities), Type 4 (advising on securities) and Type 9 (asset management) regulatedactivities. The acquisition will provide diversified investment channels for its members. Itwill also benefit the business structure of the Group and diversify business risks. It is envisaged that with these two arms of operations (physical commodities and financialproducts) comes into full operation, they would produce much synergy in realising theuntapped potential of these enrolled members into material benefit to the Group. TheGroup’s current business setting has been fully in line with the Belt and Road Strategy. The Group pays attention to spot delivery and are devoting great efforts to develop localand cross-border trading in farming, grains, animal husbandry, side line of business,fishery, forestry and frozen goods. In order to develop its online trading platform foragricultural products, the Group has entered into a cooperation agreement with ShinonghuiAgricultural Industry Company Limited (“Shinonghui”) pursuant to which all-dimensionalcooperation will be rolled out by the parties on the online trading platform for agriculturalproducts of the Group taking advantage of the development and marketing of agricultural products implemented by Shinonghui and its related services. Shinonghui was establishedunder the approval of State Administration for Industry & Commerce of the PRC. Relyingon direct supply from agricultural industrial park and place of origin with the assistancefrom integrated online service platform, Shinonghui strives to create a comprehensiveindustrial chain for its agricultural industry. According to the agreement, both parties willset up a Sino-foreign enterprise in Guangxi and integrate resources in order to set up alarge-scale platform for the integration of cross-border trade, finance and Internet big datain the ASEAN countries and create a small currency foreign exchange settlement ecosystem. During the year, the Group has also cooperated with Guangxi Sumaotong Business ServicesCompany Limited (“Guangxi Sumaotong”) to conduct cross-border electronic trading,pursuant to which all-dimensional cooperation will be rolled out by the parties for crossborder electronic trading of Guangxi specialty agricultural products on the online tradingplatform of the Group taking advantage of the integrated services for foreign trade importand export business implemented by Guangxi Sumaotong. Guangxi Sumaotong foreigntrade comprehensive services platform (www. sumaotong.cn) has been on trial run. It is theonly authorised professional institution to develop and operate Guangxi-ASEAN Region(Nanning) Foreign Trade Integration Complex Clearance Acceleration Project. Accordingto the Strategic Cooperation Agreement, the Group is responsible for providing necessaryresources and technical support such as online trading platform. Guangxi Sumaotongis responsible for integrating customs clearance, tallying, financing, insurance, exchangesettlement, tax refund of foreign trade import and export business into one platform,i.e. providing “onestop” foreign trade services to market participants. The pilot site isin Nanning city. Loan platforms for small and medium-sized enterprises (“SME”) fromNanning City SME Business Centre (a department of Nanning city municipal government)will be actively introduced and favourable policies for SME financing will be brought in.By implementing this cooperation, the Group will build a large platform based on crossborder trade in the China — ASEAN region, incorporating the three areas of cross-border trade, finance and internet technology big data to open up the China — ASEAN regionalcross-border trade. Prospects: The global economy continued to recovery in 2018 and China’s economy maintains steadygrowth. The International Monetary Fund (IMF) forecasts a global economic growth of3.9%, while growth in emerging and developing economies in Asia is about 6.5%. The global economic center gradually moved eastward which Asia is the main power source ofglobal economic growth. Under the “The Belt and Road Initiative” strategy, the economicand trade relations between China and ASEAN continued to deepen. Regional integrationwas promoted and cross-border e-commerce also developed rapidly. In 2017, through thecross-border e-commerce management platform, the total import and export volume ofretail sales reached RMB90,240 million representing an increase of 80.6% over the sameperiod of last year. The Group believes that cross-border e-commerce will bring newopportunities to more countries, enterprises and groups. Looking forward, the Group will continue to expand commodity spot delivery tradingbusiness to Indonesia as the first stop of the ASEAN 10 and gradually developed marketssuch as ASEAN and Muslims. APCM, a subsidiary of the Group, has obtained all theoperating licenses from the relevant authorities of the Indonesian government that formallylaunched the online commodity spot and medium to long term delivery and tradingbusiness. APCM also can carry out financial futures business after fulfillment of further legal andcompliance requirements imposed by the local government and regulatory authorities.To this end, the Directors view that APCM, together with the Group’s other relatedbusinesses, can not only create a spot commodity trading network, but also develop tradingof futures business at the same time. Market shares constantly rising. With the Groupfocuses on the bulk commodities trading in farming, grains, animal husbandry, side line ofbusiness, fishery and forestry utilising the advantages of NCCE in geographical position,human relations and policies of Guangxi province. In addition, the Group has obtainedthe approval from SFC for the acquisition of Great Wall Securities. Upon completion ofthe transaction, Great Wall Securities will become a non-wholly-owned subsidiary of theGroup. The acquisition helps the Group to develop a more diversified investment pipelinein order to establish itself as a financial industry solution provider. In addition, the Group also cooperated with Guangxi Sumaotong and Shinonghui. Asthe Group gradually build a large platform based on cross-border trade in the China —ASEAN region which promotes cross-border trade, finance and internet technology withdeep integration. On the basis of mutual benefit and reciprocity, The group will integrate ourrespective advantages and resources to create greater commercial value. By carrying outphysical cross-border business, financing platforms specifically supporting cross-bordertransactions will be built up step by step by cooperating with financial institutions andinvestment companies home and abroad. Such platforms will be responsible for providingflexible trade financing to legitimate trade organisations. Financing will be provided todomestic and international trade based on credit demands of different trade organisationsand trade forms to solve the problem of funds shortage in entity enterprises and circulationenterprises. In order to enhance the competitiveness of the diversified platform, the Group aggressivelylooks for strategic partners. The Group will invest Zhong Ke (Shenzhen) SatelliteCommercial Application Company Limited (“ZK (Shenzhen) Satellite”) 25% registeredcapital and China RS (Shenzhen) Satellite Application Innovation Institute CompanyLimited (“China RS (Shenzhen)”) cooperate in the areas of commodities or etc. TheCompany provides a spot trading platform utilising satellite technologies to track thesources for its bulk commodities to ZK (Shenzhen) Satellite, while ZK (Shenzhen) Satellite provides information service to the Company. The parties will collaborate comprehensivelyto provide credible and fair public data relating to the circulation and traceability fordomestic and cross-border bulk commodities trading so as to assure the authenticity ofgoods and safety in logistics. So that both parties to the transaction and all relevant serviceproviders such as trade finance and logistics, can more effectively and accurately graspthe market conditions and market conditions. The cooperation can gradually integrate thelogistics, product flow and cash flow of bulk commodities subject matters into the exchangeplatform which is a significant step.

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