China

China Huarong Asset Management Planning Mainland IPO

Summary:

  • China Huarong Asset Management (2799.HK) plans to launch an IPO in mainland China, according to Sina.
  • The company has declined to reveal pricing details.

Why It Matters:

  • The Chinese government established China Huarong Asset Management in 1999 as one of four “bad banks” to deal with the non-performing loan issues of state-owned commercial banks. The company launched an IPO in Hong Kong in 2015 and raised RMB 17 billion.
  • The company is expanding its business very quickly and is in need of new capital. The dual IPO would make the company the first troubled asset manger in the mainland stock market. Although the company has refused to reveal pricing details, the market expects it to raise at least RMB 19 billion.
  • The slowing Chinese economy and the growth of non-performing loans is a pending disaster for the banking sector. However, it provides a huge opportunity for Huarong to profit from deals on deteriorating assets.