KVB Kunlun’s full H1 interim report: Company looks into new markets, focuses on China

Following last week’s announcement of its financial results for the year 2014, Hong Kong-focused FX broker KVB Kunlun has released its 2014 interim report, which further elaborates on the company’s current position.

The company completed the first half of this year with a loss having been recorded, however some ground was gained in the second quarter in which the company’s fortunes turned around after a sustained period of losses, recording a HK$1.2 million profit between April and June this year.

Indeed, whilst a profit was attained, it was not enough to pull the company’s balance sheet out of the red, however with the issuance of the interim report, some factors for consideration are present.

39.2% drop H1 rev YoY

39.2% drop H1 rev YoY

KVB Kunlun states that the slowdown of market momentum also caused a significant reduction in client net deposits, from around USD15 million in 2013 to just above USD8 million in 2014, in addition to the drop in revenues attained from leveraged FX, which declined from HK$70,296,000 for the first six months of 2013 to almost half of that amount, HK$42,749,000 for the first six months of 2014.

With all eyes on China, KVB Kunlun is well positioned to follow other firms into the offering of trading instruments which focus on the Chinese market, having stated that a particular highlight during the first six months of 2014 is that the Group has moved forward to enhance the trading experience of its clients by launching a CHINA300 index contract for difference (“CFD”), which was designed to meet the needs of its clients who are interested in investing in Chinese equity market.

For those trading in other Asia Pacific currencies, KVB Kunlun  has narrowed the spread of most non-JPY cross currency pairs, Japan’s domestic market being one of the most competitive as its own firms generate 35% of all FX order flow and dominate the market over international companies. Therefore, in order to maintain interest, there is often a necessity to provide keen spreads.

During this accounting period, KVB Kunlun has been conducting on-going studies on identifying hot spots to develop new branches or subsidiaries. The Group set up a new subsidiary in the People’s Republic of China located in Zhuhai City Hengqin New District on 5 March 2014. The Group has also been performing market studies to explore commercial viability for new products. Whilst this was reported by the firm as an on-going project, the company has purely embarked on investigation, but has not expanded further than the addition of its Shanghai operations during this quarter, with the result of its studies into new areas yet to bear fruit. This reinforces LeapRate’s perspective that firms are perhaps showing prudence in times of low revenues, using those times to maintain their business, and will grow during times of high returns.

For this quarter, the company’s board of directors has confirmed that it does not recommend the payment of any dividend for the period under review (2013: On 21 May 2013 and 3 June 2013, the Company had declared special dividends of HK$1 and HK$0.6 per ordinary share based on the outstanding shares as of the respective dates. The total special dividends of HK$16,000,000 were paid to the then shareholders of the Company.)

For the full interim report, click here.

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