Retail broker KVB Kunlun issued a profit warning to shareholders this Thursday. The broker, which is incorporated in the Cayman Islands, is listed on the Stock Exchange of Hong Kong.
After reviewing the company’s accounts, senior executives at the firm released a statement saying that they expect “a substantial loss” for the first quarter of this year.
In that statement, the company attributed this state of affairs to fair value loss on the embedded derivative portion of some bonds that were issued in February of 2018. On top of that, KVB Kunlun claimed that there had been an increase in the financing costs associated with those bonds.
The broker also cited lower leveraged trading volumes, in both the foreign exchange and other markets, as a reason for its losses. KVB Kunlun attributed that decrease in trading to the low volatility in the financial markets.
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No volatility, more losses
Looking ahead, the broker said that if markets do not pick up, it will mean continued losses for the firm. More specifically, the company stated that it expects further losses for the second quarter of this year if market conditions do not improve.
Having said all of this, the KVB Kunlun board, which issued Thursday’s statement, stated twice that the company is yet to be audited and that their estimates are based on their initial review of the broker’s finances.
If KVB Kunlun does lose money, it will come after two years of exceptional progress for the broker.
Back in 2017, the firm reported a 50 percent year-on-year increase in its revenues for the first six months of that year.
The following year, the broker’s leveraged trading revenues grew massively, and the firm was able to report a 55 percent spike in its revenues.