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Yuan's gamble on Everbright pays off

By Tang Zhihao (China Daily)
Updated: 2009-08-25 08:07

The initial public offerings (IPO) are often considered to be the breeding grounds for instant fortunes, but it often hinges on the ability of the investor to choose the right stocks at the right time.

Yuan Dezong, owner of the privately held Dongguan-based Guanghui Sci-tech Investment and Guaranty Co is one such investor who made a fortune and entered the rich list in China after the recent listing of Everbright Securities shares.

"When the 50-year old Yuan decided to invest in Everbright Securities in 2004, the securities firm was teetering towards bankruptcy. His perseverance and the manifold increase in his investments proves he is extremely good at investment planning," a manager of a listed company told the Shanghai-based Amoney Weekly.

As the fifth largest shareholder in Everbright Securities, Yuan's current holding of 80-million non tradable shares in the firm is estimated at around 2 billion yuan ($293 million), based on the listing price of the shares on the first trading day.

The low-profile investor completed his first purchase of 10 million shares for 10 million yuan in 2004. Three years later, he purchased an additional 70 million shares by investing an additional 192.5 million yuan.

Although Everbright Securities has become the first listed Chinese brokerage in almost seven years after CITIC Securities Co's December 2002 share float, there were absolutely no indications in 2004 that the firm would be listed in five years.

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No one knows why Yuan decided to invest in Everbright Securities when the firm was languishing. "I have never made large losses in my 20-year investment career," Yuan was quoted as saying when he spoke to Li Qiangang, a journalist based in Dongguan. So far, Li is among the very few who has met and talked with the mysterious billionaire.

Yuan was also among the top 10 tradable shareholders of a bunch of listed firms over the past few years. Each time he has had the knack to invest beforehand and boost his investment when share prices go up.

Guaranty companies like the one operated by Yuan engaged in share-investing activities have become common in recent years in Guangdong, a research has found, with most guaranty companies directly involved in direct share-option investment in listed companies.

Analysts say that the relatively low profit margin, mostly at 1-2 percent, and the fierce competition had prompted many such firms to make bolder direct capital investment moves, the Amoney report said.

"Yuan's getting-rich-overnight story is a random case," said Liu Xiaoqiu, a veteran stock market researcher, adding that according to his calculations, over 80 percent of such direct share-investing plans end up in substantial losses for the investor.

Guaranty firms in Guangdong need more support from the government to ensure that they can focus on their previous core-business of providing loan guarantees to small and medium-sized firms, he said.