KVB Kunlun issues profit warning as FX trading income drops

Maria Nikolova

The brokerage expects to register a substantial loss for the six months to end-June 2019.

Hong Kong-focused retail Forex broker KVB Kunlun Financial Group Ltd (HKG:6877) has issued a profit warning for the first half of 2019.

Based on the preliminary review of the latest unaudited consolidated management accounts of the Group for the six months to the end of June 2019, it is expected that the Group would incur a substantial loss for the first six months of 2019 as compared to the net profit for the six months ended June 30, 2018.

The Board attributes the loss to the following factors:

  • a reduction in leveraged foreign exchange and other trading income earned from external customers due to reduced volatility which led to decrease in trading volume of the Group’s customers in the Relevant Period;
  • regulatory authorities in different countries, including Australia and Hong Kong, tightened the regulations on leveraged foreign exchange trading which led to investors’ re-consideration on their investment portfolio; and
  • the global economy has entered a synchronized slowdown during the Relevant Period which affect investors’ attitude towards investment in leveraged foreign exchange and commodity products.

Let’s recall that the brokerage has issued a similar warning for the first quarter of 2019. Back then, the brokerage also blamed the gloomy forecast on a reduction in leveraged foreign exchange and other trading income earned from external customers due to reduced volatility.

In the meantime, KVB Kunlun is engaged in a process of Identification and Disengagement of PRC Domestic Clients that aims to ensure the Group’s legal compliance and is in the interests of the Company and its shareholders as a whole. This process was launched following the receipt of a letter from the Australian Securities and Investments Commission (ASIC). The letter informed KVB Kunlun that, as a holder of an Australian Financial Services License, it is obliged to comply with applicable laws of foreign jurisdictions. The letter recommended that licensees should seek legal advice to ensure that the products and services they offer to their clients comply with applicable foreign laws.

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