23 February 2019
Chairman Chang Zhenming tried out all ways to pull CITIC Pacific back from the brink. Photo: Bloomberg
Chairman Chang Zhenming tried out all ways to pull CITIC Pacific back from the brink. Photo: Bloomberg

Goodbye, CITIC Pacific! Hello, CITIC Limited!

“For the first time ever, our investors will have access to China’s largest, most prestigious and pioneering conglomerate.”

So goes a statement on the website of CITIC Limited as it marks its trading debut on the Hong Kong stock exchange under a new name on Monday.

CITIC Ltd. is, of course, the old CITIC Pacific after it completed a HK$227 billion acquisition of assets from its state-owned parent, CITIC Group.

CITIC Pacific, which gained a backdoor listing by acquiring Tylfull Company Ltd. in 1990, is now officially retired. In retrospect, the company run by Larry Yung Chi-kin, son of CITIC founder Rong Yiren, had a sweet childhood before going through its tough teenage years.

In the 1990s, CITIC Pacific was a hot stock, much like Alibaba is now before its New York listing. Yung represented a new generation of China princelings whose rising stars glimmered along with those of Li Ka-shing and Robert Kuok Hock Nien. Playing aggressively, he snapped up minority stakes in Cathay Pacific, CLP Holdings and Cable & Wireless HK Telecom in the run up to Hong Kong’s handover.

The “drunken sailor” spending spree went well for the red-chip conglomerate until the Asian financial crisis struck in 1997. Almost crushed by a huge debt burden, CITIC Pacific asked for a lifeline from the parent and started to sell down its stakes in prestigious Hong Kong firms.

As it went through its teenage years, CITIC Pacific appeared to be searching for its identity, reduced to following peers and trends.

It’s hard to define what CITIC Pacific really was, except to note that it had a finger in almost every pie, thus losing its focus. An equity analyst once said, one sure sign a certain sector had peaked was if CITIC Pacific had left for another new business.

The group’s massive bet on Australian resources proved to be the last straw. Yung was drawn into the promises of an Australian dollar accumulator just as the global financial crisis detonated in 2008. Yung was eased out as a result.

Funny enough, if he had held on to those contracts, he would have been a national hero. But that was history.

CITIC Group chairman Chang Zhenming took over the subsidiary, and being a go player, he tried out all ways to pull the listed company back from the brink.  Early this year, he came up with a plan to use CITIC Pacific as a vehicle for the parent, which owns banking, brokerage and real estate assets.

If the life of a corporate resembles that of human being, I predict that after a tough 23 years, CITIC will now learn how to survive and thrive in the market. And with a market capitalization of HK$375 billion, it’s a company that’s too big to fail.

Our best wishes for CITIC – without the Yungs – and may it deliver on its promise that “the China story is being written today by companies like ours”.

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EJ Insight writer

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