HONG KONG (Reuters) - Shares in CITIC Pacific <0267.HK> dived 38 percent on Tuesday following a raft of downgrades by banks after the company's surprise warning of potential foreign exchange losses of nearly $2 billion.
Beijing-backed CITIC Pacific warned late on Monday of potential mark-to-market losses from leveraged foreign exchange contracts of HK$14.7 billion ($1.9 billion) -- or nearly a third more than its net profit in 2007.
Taking into account a realized loss of HK$808 million from closed contracts, its total loss could amount to HK$15.5 billion.
CITIC Pacific shares were set to open at HK$9.0, down HK$5.52 as trading resumed on Tuesday.
"The lack of internal controls is a major fear," Citi said in the research note, adding that CITIC Pacific had concluded foreign exchange trading contracts without proper authorization.
The bank late on Monday cut the Chinese conglomerate to sell from buy and dropped its target price to HK$6.66 from HK$28.
Goldman Sachs on Tuesday downgraded the Chinese conglomerate to sell from neutral, while JP Morgan cut the company to underweight from overweight.
They reduced their target price on CITIC Pacific's shares to HK$12.50 and HK$10, respectively, from HK$31.50 and HK$36.
(US$1=HK$7.8)
(Reporting by Alison Leung; Editing by Anne Marie Roantree)
