HONG KONG - CITIC Pacific shares plunged 46.4 per cent on Tuesday to their lowest in 10 years after the Hong Kong branch of the Chinese government's investment firm warned it may lose up to US$2 billion (S$104 billion) from unauthorised currency bets.

The company said in a filing to Hong Kong's stock exchange Monday that it had incurred loses of HK$808 million (S$153 million) terminating leveraged foreign exchange contracts.

In addition, it said it had further potential losses of HK$14.7 billion from outstanding leveraged forex contracts in Australian dollars and euros.

Investors reacted aggressively when trading opened onTuesday. Shares in the company had been suspended on Monday.

At 10.27 am (same time for Singapore) shares in the company were trading at HK$7.78, down 46.4 per cent and its lowest figure since 1998. They had already fallen some 40 per cent in the past six weeks.

Citic Pacific said it bought the currency contracts to fund a AUD 1.6 billion (S$1.62 billion) iron ore mining project in Western Australia.

The bets were made by group finance director Leslie Chang, who had acted without the proper authorisation, the firm's chairman Larry Yung said in a statement late on Monday. He also apologised to shareholders.

The firm first became aware of the currency exposure on Sept 7 and had terminated some of the contracts, but the situation has deteriorated with the Australian dollar falling sharply since early October.

Citic Pacific said in the statement that its parent, which has a 29 per cent stake, had agreed to provide a standby loan of US1.5 billion to help it through the crisis.

Finance director Chang and financial controller Chau Chi-yin have been replaced because of the currency exposure, it said.

he board believes that the principal business activities of the group will not be affected,' Citic Pacific said.

The conglomerate's business interests span from aviation to infrastructure.

Goldman Sachs cut its investor advice on Citic Pacific to sell after the announcement.

Professor Billy Mak, a finance professor at Hong Kong Baptist University, said the incident raised issues over internal controls at companies.

'Current rules on corporate governance only require management to disclose and seek approval from the board on any investment deemed "significant", but there's no definition of "significant",' he told the South China Morning Post. -- AFP