????????????????????? ???? Case Studies on Opportunities

1
????????????????????????? Case Studies on
Opportunities Challenges Arisen from the
Development of Capital Markets for the Accounting
Industry
Speaker Mr. Roy Lo, Deputy Managing
Partner SHINEWING (HK) CPA Limited
2
Future Prospect of Accountants underChinas
Sustainable Economic Growth

• Demand for professional accountants increases as
  Chinas economy is boosting
• Accounting services are necessary in every
  industry. Thus, for graduates who look for a
  stable job, accounting is one of the top choices
• Increase in Listings, Mergers Acquisitions
• Increasing Demand for Talents in Risk Management,
  Internal Audit Internal Control
• Over-demand of Accounting Finance Talents in
  China and Hong Kong

1
3
Over-demand of Accounting Finance Talentsin
China and Hong Kong

• As the global economy is recovering, most of the
  accountants stay positive to their future and
  their industry
• In the past few years, there is a shortage of
  accountants in both China and Hong Kong. At the
  same time, the remuneration of professional
  accountants maintains at a high level. This
  reflects this professional industry can stand
  within time through financial crisis
• According to the statistics of a recent market
  survey, graduates would like to work in the
  following industries for the future 5 years
• Hotel, Accounting, Social Work,
  Information Technology
  Disciplined Service

Source The Sun (2 May 2010)
2
4
Accounting Industry after Financial Crisis

• According to another market survey, about 54
  of accountants expect a pay rise in their next
  review while more than half of the accountants
  expect the salary will remain unchanged

Market Survey in 2010
This shows how fast accounting industry can
recover after the financial crisis
Source HKICPA Market Survey
3
5
Increase in Listings, Mergers Acquisitions

• Scope of accounting business
• Audit,
• Tax Advisory,
• IPO Advisory,
• Corporate Restructuring,
• Risk Management, etc.
• Rather stable in areas like Audit and Tax
  Advisory
• Demand of IPO Advisory also increases as the
  global stock market improves gradually
• As the global economy is recovering, there are
  more companies planning for capital raising in
  the markets. Thus, a number of PRC / overseas
  companies come to Hong Kong for listing

4
6
Listing in Hong Kong

• Gateway to Mainland China
• Leveraging on Mainland Chinas growth
• Well-established legal system
• Various acceptable accounting standards(HKFRS,
  IFRS and US GAAP etc.)
• Good regulatory framework
• Free flow of capital and information
• Advanced clearing and settlement infrastructure

5
7
Opportunities Arisen from the Current Market
Situation
Total Number of Listed Companies in HK Stock
Market
Total Number of H-Shares in HK Stock Market
Source HKEx Website (As at 15 Jun 2010)
6
8
Corporate Governance

• 2 key elements in Corporate Governance
• i. Risk Management
• ii. Internal Control
• Another role of accountants is to effectively
  estimate and control corporate risk, help
  companies to reduce financial loss as well as
  maintain clients reputation among peers
• Financial crisis leads to a bigger demand of
  talents in risk management and internal control

7
9
Increasing Demand for Talents in Risk Management,
Internal Audit Internal Control
i. Risk Management

• The world has entered into an integrated economic
  system. Therefore, mismanagement in one company
  can affect other business parties, or even the
  whole market
• Examples Toyota, Enron, accounting
  irregularities of Worldcom and bankruptcy of
  Lehman Brothers
• The unexpected risks finally lead to bankruptcy
  of the companies above

ii. Internal Control

• A number of companies were found inadequacy in
  internal control during financial crisis
• In 2009, a few major listed companies in Hong
  Kong were found lack of internal control. Many
  investors start pay high attention to the
  corporate governance of Hong Kong listed companies

8
10
Case Study 1 One of the PRCs biggest
state-owned investment company
This Company is among the top 100 companies
listed in Hong Kong by market capitalisation as
at Jan 2009

• Announced a foreign exchange loss of HKD15.5bn
  (US1.99bn) due to exotic foreign exchange
  forward contracts
• Exchange losses stem from its stake in Australian
  iron-ore mining business.
• Seeking to protect against rises in the AUD and
  other currencies, the company decided to hedge
• Common businesses hedge against currency
  fluctuations, this company took higher risk,
  leveraging in derivative product known as
  accumulators
• The Finance Director was alleged to have proceed
  with the transactions without prior approval.
  Also, the Controller failed to provide proper
  oversight on these transactions
• Both of the executives were sacked from their
  positions

9
11
Case Study 2 Two largest railway construction
companies in China
One of these companies is among the ultra-large
integrated construction enterprises in the
world. Another one was listed among the Fortune
Global 500 companies in 2007, ranking 384th in
terms of total revenue

• These two companies revealed RMB2.26 billion
  (USD331 million) in combined losses from
  investments in structured products as of 30
  September 2008
• One of these companies loss RMB1.94 billion
  (USD284 million), from structured deposits based
  on foreign currencies, i.e. AUD. Its shares
  plunged 25.8 during that week
• The other company had incurred losses of RMB320
  million (USD47 million), from its mix of
  foreign-exchange holdings during the third
  quarter. Shares of the railroad construction
  company dropped 17.8 during that week

10
12
Case Study 3 A Hong Kong-based listed company
Engaged in property development and investment
activities

• The Group announced that from 1 Jan 2008 to 22
  Oct 2008, they have incurred losses of HKD3.7
  billion (USD476 million) from OTC contingent
  forward agreements
• This cause Groups stock to drop by 42 in a
  single day
• In order to reduce the risk associated with its
  derivative financial investments and contain its
  exposure to the market fluctuations, the Group
  has liquidated a majority of its financial
  investments and unwound a substantial portion of
  its forward agreements in October 2008

11
13
Acquiring Professional Qualifications

• Looking back, the demand for accountants is big
  no matter the market is good or bad. During
  economic downturn, accountants have to bear the
  responsibility of expenditure reduction while in
  economic recovery, accountants will be devoted in
  different kinds of acquisition and listing
  projects. Thus, their role is indispensable
• CPA acts as an additional insurance to the career
  path of accountants
• The portability of accounting knowledge is high
  and the skill sets for accountants all around the
  world are similar. Therefore, after studying the
  local laws and regulations, the accountants can
  start their practice again in whatever place

12
14
Thank you!
Contact Us 43/F., The Lee Gardens, 33 Hysan Avenue, Causeway Bay, Hong Kong Contact Us 43/F., The Lee Gardens, 33 Hysan Avenue, Causeway Bay, Hong Kong
Tel [phone]Fax [phone] Email info_at_shinewing.hkWeb www.shinewing.hk