Political risk creeps into China’s very bad bank

XinKong International Capital Holdings

13/08/2018 03:58

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Pete Sweeney
    HONG KONG, Aug 13 (Reuters Breakingviews) - Huarong Asset
Management says earnings will drop sharply, after its chairman’s
fall from grace triggered a liquidity crisis. The government,
its top stakeholder, seems content to watch the shares collapse.
Investors will take note: state backing now comes with more fine
print.
         
    Full view will be published shortly.
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    CONTEXT NEWS
    - China Huarong Asset Management, one of China's four
state-owned bad loan managers, warned on Aug. 12 that it
expected to report "a prominent decrease" in earnings for the
first six months of the year, compared to a year earlier.
    - Huarong has been trying to raise cash and take back loans
since its chairman Lai Xiaomin resigned in April due to a graft
probe, sources told Reuters on July 23. It has already divested
equity stakes in some companies and is forcing employees to take
pay cuts.
    - Hong Kong-listed shares in Huarong-linked entities have
fallen sharply in 2018. Stock in China Huarong Asset Management
has dropped nearly 50 percent in the year to date, while Huarong
International Financial Holdings is down around 60 percent.   
    - Hong Kong shares in China Huarong Asset Management were
down 5.6 percent at HK$1.84 at 10:15 a.m. (0215 GMT) on Aug. 13.
    -  For previous columns by the author, Reuters customers can
click on  SWEENEY/ 
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    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
China Huarong issues profit warning     urn:newsml:reuters.com:*:nL4N1V30A6
China Huarong trying to recall some loans as cash crunch bites
-sources     urn:newsml:reuters.com:*:nL4N1UC2FG
BREAKINGVIEWS-China’s bad banks go on, even if bad bankers don’t
    urn:newsml:reuters.com:*:nL3N1S217E
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Clara Ferreira Marques and Katrina Hamlin)
 ((pete.sweeney@thomsonreuters.com; Reuters Messaging:
pete.sweeney.thomsonreuters.com@reuters.net))