On behalf of the board (the “Board”) of directors (each a “Director”) of China Fortune Financial Group Limited (“China Fortune” or the “Company”, together with its subsidiaries collectively referred to as the “Group”), I hereby present the overall performance of the Group for the year ended 31 March 2020.
2019 proved to be a year of risks and challenges to Hong Kong society and its market, and one that was redolent of magical realism. While global economic growth slowed down significantly, the tit-for-tat trade war between China and the United States of America (the “USA”) continued. Such antagonism opened up a new window in history, undermining and overhauling the international order we were so familiar with, and this year was certainly a unique one in Hong Kong’s history.
The capital market of Hong Kong suffered from both internal and external impacts during 2019. External factors included the see-saw developments and continual escalation of the Sino-US trade war, as well as the twists and turns of United Kingdom’s withdrawal from the European Union. Internally, the ongoing social events caused by protests against the fugitive bill dealt Hong Kong, which had already found itself in a tight spot amid the Sino-US trade war, a severe blow, driving the city into its first recession in a decade. Since June 2019, tourist arrivals to Hong Kong have decreased by more than 50% yearon-year. Service sectors, such as retail, hotel, catering and tourism,have experienced a rare “severe winter”, with annual total GDP shrank by 1.2%, which was the first annual economic decline recorded ever since 2009.
However, such “severe winter” among various service sectors has not yet subsided. The sudden global outbreak of COVID-19 pandemic in early 2020 has brought forth confusion and unpredictability to the global economic trend. The global market was suffocated by the trading curbs in the US stock markets, the soaring unemployment rate worldwide and the pandemic development. The unemployment rate in Hong Kong also rose to a nine-year record high of 4.2% in March 2020.
Although surrounded by both internal and external difficulties, Hong Kong’s financial market still manifested strong resilience through more active interconnection with the mainland, high trading volume in the monetary and fixed income market, and Hang Seng Index closing at a slight increase of 9% even under volatility. In a market with an overall unstable situation and frequent-changing trend, during the year of 2019, clients from our brokerage business increased and the active level of transactions rose, save for the scale of margin business which contracted due to risk control considerations. In terms of own capital investments and asset management businesses, the investment portfolios of ours and of clients consist of high-quality Chinese-issued US dollar-denominated bond portfolio, China and Hong Kong stock portfolio of mainly large cap stock, and pre-initial public offering equity investment portfolio of companies in emerging industries that are linked to investment banking business. Despite the inevitable fluctuations derived from the impact of COVID-19 pandemic, we still managed to smoothly pass the “darkest moment” of the global market in early March 2020.
Investment banking remained our most competitive business during 2019. From April 2019 to March 2020, a total of 167 companies launched their initial public offering on the main board of the Stock Exchange of Hong Kong Limited (the “Stock Exchange”). Fortune Financial Capital Limited, in its capacity as sole sponsor, helped 4 of these companies to be listed on the main board. Meanwhile, the underwriting business of Fortune (HK) Securities Limited grew on the basis of its success in 2018, participating in 10 main board initial public offering projects in 2019. It not only acted as a joint bookrunner for the blockbuster listing of Shenwan Hongyuan Group Co., Ltd. (Stock Code: 6806.hk), but also as a global coordinator and bookrunner for other important projects such as the listings of CSSC (Hong Kong) Shipping Company Limited (Stock Code: 3877.hk), 360 Ludashi Holdings Limited (Stock Code: 3601.hk) and Newborn Town Inc. (Stock Code: 9911.hk), raising more than HK$1.8 billion for its clients. As at the date of this report, we have completed a large number of premium sponsoring and underwriting projects and have many more in the pipeline. All these have helped to shape our image as a top-notch investment banking firm connecting mainland China and Hong Kong.
As at 31 March 2020, the Group recorded a total revenue of approximately HK$179,401,000, representing a huge increase of 66.00% year-on-year, and a total loss of approximately HK$71,814,000, representing a significant decrease of 31.07% yearon-year. The loss was mainly caused by (1) an increase in corporate expenses due to the expanse of our brokerage business; (2) fair value losses due to the volatility of the stock and bond market in early 2020; and (3) losses in our associates. Our total loss decreased significantly, mostly because (1) our total revenue surged; and (2) the Company assessed the circumstances and reduced its human resources and administrative costs appropriately.
Amid the sudden outbreak of COVID-19 pandemic in 2020, we took care of each of our employees and their families, implementing safety measures meticulously and providing them with necessary supplies. In early February 2020, when the pandemic peaked in Hong Kong, we also purchased 6,000 top-quality P2-grade medical masks from Australia and donated them to the elderly and those in need in different districts through the Po Leung Kuk, thereby giving back to Hong Kong society.
After three years of baptism of fire, our team has become younger and more professional, with a more diversified business model and portfolio of products. Our corporate governance structure has improved, while our funding channels remain stable and have been expanding. Under the principles of strict compliance with relevant laws, rules and regulations and stringent risk and cost control, strongly supported by the board of directors and with the efforts of the fast-maturing management, China Fortune will not disappoint its shareholders. It will, step by step, march forward steadily and powerfully on the road of stable growth. Here I would like to extend my deepest respect and gratitude to investors and all sectors of society for their support and concern, and to the shareholders, the Board, the management and all our colleagues for their strong support and hard work.
Mr. XIE Zhichun
Hong Kong, 29 June 2020