Could The China Financial International Investments Limited (HKG:721) Ownership Structure Tell Us Something Useful?

A look at the shareholders of China Financial International Investments Limited (HKG:721) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

China Financial International Investments is a smaller company with a market capitalization of HK$1.8b, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about China Financial International Investments.

Check out our latest analysis for China Financial International Investments

What Does The Institutional Ownership Tell Us About China Financial International Investments?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in China Financial International Investments. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at China Financial International Investments' earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in China Financial International Investments. Looking at our data, we can see that the largest shareholder is Jian Chen with 9.3% of shares outstanding. The second and third largest shareholders are Zuhao Zhang and Century Golden Resources Investment Group Co., Ltd, with an equal amount of shares to their name at 9.1%. Furthermore, CEO Lin Dong Du is the owner of 6.6% of the company's shares.

On studying our ownership data, we found that 9 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of China Financial International Investments

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own a reasonable proportion of China Financial International Investments Limited. Insiders own HK$603m worth of shares in the HK$1.8b company. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are mostly retail investors, collectively hold 58% of China Financial International Investments shares. With this size of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 3 warning signs for China Financial International Investments (2 can't be ignored) that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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