Moody's and S&P Assign Baa1 and BBB Long-term Issuer Credit Rating to Guotai Junan Securities Respectively with "Stable Outlook"

Thursday, 3 December 2015, 19:42 HKT/SGT

Financial SOE Reform Affirms The Outlook

HONG KONG, Dec 3, 2015 - (ACN Newswire) - Leading integrated securities enterprise Guotai Junan International Holdings Limited ("Guotai Junan International" or the "Company", with its subsidiaries the "Group", Stock code: 1788.HK) is pleased to announce that Moody's Investors Service Ltd. ("Moody's") and Standard & Poor's ("S&P") assigned Baa1 and BBB long-term issuer credit rating respectively to Guotai Junan Securities Company Limited ("Guotai Junan", Stock Code: 601211.SH), the parent company of Guotai Junan International. The rating outlook is stable. This is the first time that the two credit agencies assigned ratings to Guotai Junan.

According to Moody's, long-term credit rating of Baa1 demonstrates Guotai Junan's standalone credit capabilities. Moody's also expects Guotai Junan's high likelihood of receiving extraordinary support from Shanghai municipal government (unrated) and the Chinese government (Aa3/stable) in case of need, which is implied in the three-notch uplift.

S&P believes that the credit rating reflects Guotai Junan's bbb- standalone credit profile ("SACP") and a moderately high likelihood of extraordinary financial support from Shanghai municipal government in case of need. Guotai Junan's top-three market position, with strong business stability, solid capital buffer, prudent risk management with simple business mix as well as manageable funding and liquidity profile underpin the SACP.

Against the backdrop of Shanghai financial SOE reform, Guotai Junan, as the only securities firm under the Shanghai International Group ("SIG"), is highly expected to receive strong support from the Shanghai municipal government. This is one of the key factors in determining Guotai Junan's leading credit rating in the industry and the stable outlook.

Support from the financial SOE shareholders highly recognized by the credit agencies

Shanghai municipal government controls Guotai Junan through SIG. Moody's assesses that Guotai Junan is considered to be a flagship securities company owned by the Shanghai government in the context of the aim to develop Shanghai into an international financial center. Both the Shanghai municipal government and SIG also have a proven track record of providing various forms of support to Guotai Junan, such as guarantees for bond issuances, shareholders loans and asset injections.

S&P also believes that Guotai Junan has a "very strong" link with the Shanghai municipal government. This results in the assessment of a "moderately high" likelihood of extraordinary support from the Shanghai government. S&P is in a view that Guotai Junan is an important platform for the Shanghai government to develop the capital market in Shanghai and provide relevant financial services. SIG, being the largest shareholder of Guotai Junan with significant shareholdings in the company, will continue to show strong commitment to the company in time of market pressure.

The beneficiary of financial SOE reform

The new round of Shanghai's financial SOE reform started in 2014, aiming to accelerate the allocation of resources to key financial companies to develop their potential and enhance their competitive advantages. Guotai Junan is a well-established company in the financial markets. With the brokerage business as its main line of businesses, it continues to grow into a all-round financial platform to serve its clients.

In July 2014, SIG transferred its 51% stake in Shanghai Securities to Guotai Junan and Guotai Junan became the only securities subsidiary under the SIG Group. In October 2014, SIG has provided a RMB 1 billion subordinated loan to Shanghai Securities to strengthen its operating capital and to develop new business.

On 26th June 2015, Guotai Junan listed in A-share market.

According to its 2015 interim report, Guotai Junan is the controlling shareholder of GTJA Allianz Funds with 51% stake. The AUM of GTJA Allianz Funds grew 157% yoy to RMB 62.8 million as at 30 June 2015, which is higher than the industry average growth rate of 70%.

The public information reveals that SIG owns Shanghai Pudong Development Bank, Shanghai Trust, Shanghai Rural Commercial Bank, China International Fund Management (CIFM), Dazhong Insurance, Anxin Agricultural Insurance, Sailing Capital Management, SIG Asset Operation Co., Ltd., and Shanghai International Group (Hong Kong). SIG also invests in large-scale financial institutions such as Bank of Communications, CPIC, Industrial Bank, etc.

Not only does Guotai Junan enjoy substantial financial and strategic support from Shanghai municipal government, it also creates Guotai Junan enormous synergies through the cooperation with the other associate companies under SIG.

Topic: Press release summary Sectors: Daily Finance
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