Core Viewpoint - The article highlights the challenges faced by second and third-tier commercial real estate, using the case of Fangzheng Securities' response to the Shanghai Stock Exchange's inquiry as a key example [1][2]. Group 1: Financial Performance and Asset Valuation - Fangzheng Securities reported a total of 1136.64 billion yuan in various financial investments, marking a 14.54% year-on-year increase. However, the net investment income and fair value changes decreased by 13.91% to 13.49 billion yuan [3][4]. - The company experienced significant losses in its trading financial assets, with a fair value loss of 6.49 billion yuan and derivative financial instruments losses totaling 14.75 billion yuan [4][5]. - The fair value of Fangzheng's investment properties dropped from 17.63 billion yuan in 2023 to 11.88 billion yuan in 2024, with a recognized fair value change loss of 5.9 billion yuan [7][8]. Group 2: Specific Asset Challenges - The Zhengzhou Yuda International Trade Building, initially valued at 12.49 billion yuan, saw its assessed value decline to 8.75 billion yuan in 2024, with a final transaction price of 7.3 billion yuan, reflecting the broader issues in Zhengzhou's commercial real estate market [2][6][12]. - The average rental price for office buildings in Zhengzhou decreased from 1.491 yuan per square meter in 2022 to 1.387 yuan per square meter in 2024, indicating a downward trend in rental income [8][9]. - The average rental price for commercial shops in Zhengzhou also fell significantly, from 3.75 yuan per square meter in 2022 to 2.53 yuan per square meter in 2024, with a notable decline of 23.27% in 2024 [10][11]. Group 3: Strategic Decisions and Market Conditions - Fangzheng Securities plans to sell the Zhengzhou Yuda International Trade Building to enhance cash flow and improve capital efficiency, indicating a strategic shift to focus on core business operations [13]. - The overall vacancy rate for quality office buildings in Zhengzhou increased from 19.7% in June 2022 to 25.3% in June 2024, reflecting the deteriorating market conditions [8].

Core Viewpoint - The company received an inquiry letter from the Shanghai Stock Exchange regarding its 2024 annual report, focusing on the disclosure of financial asset investments and related losses [1][2]. Financial Asset Investments - As of the end of 2024, the company held various financial investments totaling CNY 1136.64 billion, a year-on-year increase of 14.54% [2][3]. - The net investment income and fair value change net income for the period amounted to CNY 13.49 billion, a decrease of 13.91% year-on-year, primarily due to losses in trading financial assets and derivative financial instruments [1][2]. - The company reported a fair value loss of CNY 6.49 billion in trading financial assets and a total loss of CNY 14.75 billion in derivative financial instruments [1][2]. Specific Financial Asset Details - The initial cost of various financial assets includes CNY 492.55 billion for trading financial assets and CNY 29.73 billion for other equity instruments [2][3]. - The breakdown of financial assets includes perpetual bonds, government bonds, corporate bonds, and public funds, with specific risk ratings and overdue situations detailed [3][4]. Losses and Valuation Adjustments - The company experienced significant losses in fair value changes and investment income due to market conditions and the performance of underlying assets, particularly in non-listed equity investments [7][9]. - The company conducted regular valuations of its financial assets, with adjustments made based on market conditions and the performance of underlying investments [7][9]. Derivative Financial Instruments - The company reported a fair value change loss of CNY 4.72 billion in derivative financial instruments, attributed to hedging activities against investment risks [9][10]. - The losses were primarily due to the opposing performance of the spot and futures positions, with the spot positions generating profits while futures positions incurred losses [9][10]. Wealth Management and Asset Management - The company does not engage in self-funded investments in its wealth management or asset management businesses [10][12]. - The company has established a warning and tracking disposal team to manage overdue or defaulted financial assets, ensuring adequate valuation adjustments are made [12][13]. Buyback Financial Assets - The company reported that all stock pledge repurchase agreements had defaulted, with cumulative impairment provisions increasing over the years [14][15]. - The company has ceased new stock pledge repurchase business and is managing existing contracts based on the recoverability of pledged assets [15][16].

Core Viewpoint - The company, Fangzheng Securities, has undergone an audit of its 2024 financial statements, revealing significant details about its financial asset investments and the associated risks and losses incurred during the year [1][2]. Financial Performance - As of the end of 2024, the total financial investments held by the company amounted to 113.664 billion yuan, representing a year-on-year decrease of 13.91% [2][4]. - The company reported a net investment income and fair value change of 1.939 billion yuan, an increase of 22.49% compared to the previous year [4][9]. - The fair value losses from trading financial assets amounted to 649 million yuan, while losses from derivative financial instruments totaled 1.475 billion yuan [2][4]. Financial Asset Details - The breakdown of financial investments includes trading financial assets, other debt investments, equity investments, and derivative financial assets, with a total initial cost of 111.738 billion yuan [5][6]. - Specific asset categories include perpetual bonds (10.782 billion yuan), government bonds (25.190 billion yuan), and corporate bonds (2.408 billion yuan) [5][6]. Investment Losses - The company experienced significant losses in its financial asset investments, with a notable decline in the valuation of non-listed equity investments, which decreased by 1.003 billion yuan due to market conditions [9][10]. - The losses from derivative financial instruments were primarily attributed to hedging strategies that resulted in losses when the market rose [10][12]. Risk Management - The company has established a warning and tracking disposal team to manage assets with overdue or default situations, ensuring regular reviews of asset disposal processes [12][16]. - As of the end of the reporting period, there were nine financial products with overdue or default situations, with an initial cost of 475 million yuan and cumulative impairment of 405 million yuan [12][16]. Regulatory Compliance - The audit conducted by Ernst & Young confirmed that the financial statements of Fangzheng Securities complied with the relevant accounting standards, ensuring that the financial asset investments were accurately reported [13][14].