LDC London Asia

RNS Number:0079Y
London Asia Capital PLC
08 June 2007


For immediate release: 8 June 2007


                            London Asia Capital plc

                         ("London Asia" or "the Group")

                         Investments by China Exchange


China Exchange Ltd ("CEL"), the Singapore incorporated financial services
business in which London Asia announced it had taken a 40% stake earlier this
week, has made three investments in Chinese financial services businesses for a
total of #7.24 million. All three investments (described below) are
headquartered in Xi'an, the capital of Shaanxi Province.

Xi'an Private Equity Exchange ("XPEE")

CEL has acquired a 40% stake in XPEE, the leading private equity exchange in
Northwest China. The tough requirements and long waiting list for companies to
list on the main stock exchanges in China has meant that assets and equity
exchanges have prospered to serve the needs of companies that do not meet the
criteria for the two major domestic exchanges, and for the sale of assets and
projects, particularly state owned. There are currently around 25 active
exchanges, and XPEE is the only one that is privatized. In 2006, there were
17,074 successful transactions on China's assets and equity exchanges, worth
#1.8 billion, of which just over half by number and around two third by value
were state-owned assets.

XPEE also provides a range of investment banking and related services, including
venture capital share custodian services. XPEE manages funds for wealthy
individuals and companies, providing short term financing to enterprises. It
also advises on financing, equity trading services, listings on local and
foreign stock exchanges, and project finance.

Xi'an Jiuleong Mortgage Company ("XJM")

CEL has acquired a 90% stake in XJM, a registered mortgage company that provides
mortgage and pawn broking services. Established in 2002, XJM currently focuses
on Shaanxi Province, but is authorized to provide its services nationwide.
Following the investment by CEL, the intention is that it will expand its
operations across China.

China's mortgage industry is growing at an estimated 40% per annum, as
increasing numbers of Chinese opt for private ownership of property. However,
penetration still remains low compared to other countries, with mortgages only
8.5% of total loans and 11.1% of total GDP in 2003, versus 34.3% of total loans
and 50% of total GDP in Hong Kong.

Pawnshops are widely used by small and medium sized enterprises ("SME's") in
China as a source of finance, given the difficulties that they face in securing
adequate funding from the banking sector. With the continuing expansion of the
SME sector in China, in 2006 pawn broking revenues hit an estimated RMB 96
billion (#6.3 billion), up 40% from the previous year. Approximately 50% of the
industry's total turnover relates to SME's.

Pawnshops are being used by investors in the stock market, with the investor
borrowing up to 80% against the value of the stock pledged with the shop, paying
a 2% management fee - similar to the margin finance facilities offered in other
countries. With the surge in the Chinese stock market, this has been a rapidly
growing segment of the industry.

At the end of 2006, there were less than 2,500 pawnshops and mortgage companies
in China. By comparison, in the West there is an estimated 1 pawnshop for every
20,000 residents. To reach this level of penetration in China there would need
to be 66,000 shops.

Shanxi Yuansheng Credit Guarantee Limited ("SYCG")

CEL has also acquired an 80% stake in SYGC. Established in 2005, it provides
credit guarantee services, mainly targeted at SMEs applying for loans. Demand
from SMEs for credit guarantees in China far outstrips supply, due to the high
growth experienced by the SME sector and tight credit restrictions and lending
terms imposed by the banking sector.

The amount of SME loans guaranteed by credit guarantee companies in China has
increased rapidly since 2000 - guarantees outstanding reached RMB 387 billion
(#25 billion) in 2005.

The sector is ripe for consolidation as most of China's Credit Guaranty
Companies (CGC) are very small. Of the 225 CGCs surveyed by the Chinese
Government in 2004, the average asset that each carried was approximately RMB33
million (#2.2 million) and the average number of employees in each was seven.

Simon Littlewood, London Asia Chief Executive, said: "In the last three weeks,
London Asia has invested nearly #12 million in four new companies in which it
holds 40% stakes, the combined capital of which is over #27 million, with those
businesses making investments off their own balance sheets of #8.8 million.

"These investments significantly extend the range of services our investee
companies can offer to SMEs in China. Most struggle to secure adequate finance,
given the difficulty of accessing the main stock markets, and the relatively
undeveloped banking sector which tends to focus its lending on larger
businesses. The range of licences the Group has acquired over the last few weeks
will open up new opportunities for the Group."

For further information please visit www.londonasia.com or contact:

Simon Littlewood          John West/Andrew Dunn        Jonathan Wright
London Asia Capital plc   Tavistock Communications     Seymour Pierce
Tel: 020 7231 0282        Tel: 020 7920 3150           Tel: 020 7107 8000



                      This information is provided by RNS
            The company news service from the London Stock Exchange

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