© Reuters. FILE PHOTO: The logo of China Huarong Asset Management Co is seen at its office in Beijing, China, April 16, 2021. REUTERS/Thomas Peter/File Photo
(Reuters) – Chinese state-owned asset manager China Huarong Asset Management said on Wednesday it will receive fresh capital worth 42 billion yuan ($6.59 billion) from a state consortium led by Citic Group as part of a restructuring plan.
Huarong intends to issue a maximum of 39.22 billion domestic shares and not more than 1.96 billion shares listed on the Hong Kong exchange to a consortium of investors including Citic Group, China Cinda Asset Management and China Life Insurance, among others.
“It is of the view that the Issuance is the only practical measure to solve the capital insufficiency difficulty of the company and to satisfy the regulatory requirement,” Huarong said in the filing to the Hong Kong stock exchange.
The deal would allow Citic Group to assume the Chinese government’s controlling stake in the embattled asset manager as part of a plan by regulators to fold financially shaky state asset managers into financial holding groups.
Citic Group would subscribe to no more than 18.82 billion shares in Huarong while China Cinda, in a separate statement, said it would contribute about 4 billion yuan to pick up a 4.89% stake in Huarong.
Huarong, one of the four state distressed debt managers and counts China’s finance ministry as its largest shareholder, had missed a March deadline for filing its 2020 earnings, sparking a rout in its U.S. dollar-denominated bonds that spread to other Chinese issuers.
Bonds rebounded in August after the state-backed rescue plan, and its divestment deals amid a regulatory push to sell non-core assets as part of its business revamp, Reuters has reported.
In its Wednesday statement, Huarong said that it would sell its 40.5% stake Huarong Xiangjiang Bank, and 79.9% stake in its financial leasing unit. It previously revealed similar divestment plans in consumer finance unit, and securities unit.
On Tuesday, Huarong has been granted approval to raise 70 billion yuan of financial bonds in the interbank market, as it continues to recover its credit profile and re-focus on its main bad loan business.
In August, Huarong announced a first-half 2021 profit of 158.3 million yuan ($24.5 million) and a nearly $16 billion loss for 2020.
($1 = 6.3780 renminbi)
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Stats had a positive effect on the European stock market. European growth stocks
West European stock indexes closed Wednesday’s trading with a confident growth. Traders evaluated the fresh batch of statistics and bought European growth stocks.
What influenced European stocks to high growth?
GDP volume in France rose 0.2% in the third quarter compared to the previous three months, final data from the national statistics institute Insee showed. The final data coincided with a preliminary estimate. Analysts, on average, had not expected a revision, according to a Trading Economics survey. GDP growth slowed from a 0.5% rebound in the second quarter.
Consumer prices in France, harmonized with European Union standards, rose 7.1% year-over-year in November. Insee also reported. The November rate of increase in consumer prices coincided with that of October, and analysts polled by Trading Economics expected inflation to remain at the same level.
Consumer spending in the country collapsed by 2.8% in October compared with the previous month. Analysts polled by Bloomberg expected a more moderate decline of 1 percent. The consensus forecast of experts polled by Trading Economics envisioned a 0.6% decline. The decrease in consumer spending was the maximum since April 2021.
The number of unemployed in Germany increased by 17 thousand in November, according to the Federal Employment Agency of Germany. The rise in the index was marked at the end of the sixth month in a row. Experts interviewed by Bloomberg agency, on average, predicted an increase of 13.5 thousand. Respondents to Trading Economics expected an increase of 13 thousand.
Additional positives for investors in European markets on Wednesday were messages about easing of coronavirus restrictions in a lot of cities in China. Note that Amazon’s stock price is also rising if you are interested in the U.S. stock market.
Earlier, we reported that U.S. stock indices were up 2.2-4.4%.
U.S. stock indices today rose 2.2-4.4%
The U.S. stock indices today closed the trading on Wednesday with the confident growth due to the statements of the Federal Reserve Chairman, Jerome Powell, who confirmed that the U.S. Central Bank could slow down the basic rate rise as early as in December.
Judging by the quotations of futures on the level of the prime rate, U.S. stock market indices expect the Federal Reserve to raise it by 50 basis points (bps) in December – to 4.25-4.5%. The U.S. Central Bank has increased the rate by 75 bps at each of the previous four meetings. Against this background, the current stock price of Facebook also rose.
The report by the industry organization ADP, published on Wednesday, showed a slowdown in job growth in the U.S. private sector. Their number increased by 127,000 in November, the lowest rate since January, said the ADP. Analysts polled by The Wall Street Journal on average had forecast job growth of 190,000 after a jump of 239,000 in October.
Data from the U.S. Commerce Department, also released Nov. 30, showed higher-than-reported growth in the U.S. economy in the third quarter. U.S. GDP grew at an annualized rate of 2.9% in the July-September quarter, rather than the previously reported 2.6%. Experts polled by Trading Economics had expected an average revision of 2.7%.
Also, the Federal Reserve released its regional Beige Book survey Wednesday, showing that economic activity in the United States was little changed in the fall.
Federal Reserve banks in five counties reported a weak increase in activity in October and November, while the other seven reported a stable or slightly declining economy.
The Dow Jones Industrial Average index was up 737.24 points (2.18%) at 34589.77 as of Wednesday’s market close.
Standard & Poor’s 500 rose 122.48 points (3.09%) to 4,080.11 points.
The Nasdaq Composite added 484.22 points (4.41%) to 1,468.
All three U.S. stock market indices closed November, with the Dow Jones gaining 5.3%; the S&P 500 gaining 4.6%, and the Nasdaq Composite gaining 3.3%.
Earlier we reported that Main European stock indices were rising during trading.
Main European stock indices rise in trading
Main European stock indices are rising during trading on Thursday. The Stoxx Europe 600 composite index of the largest companies in the region rose 0.58% to 442.60 points. German DAX is up 0.34%, British FTSE 100 is up 0.15%, French CAC 40 is up 0.01%, Italian FTSE MIB is up 0.47% and Spanish IBEX 35 is up 0.45%.
What affected the best European stock indices?
During a speech at the Brookings Institution on Wednesday, Powell reiterated that the Fed could slow the rise in the prime rate as early as December. “The time to moderate the pace of rate hikes may come as early as the next meeting,” Powell said.
The Fed chair, meanwhile, tried to balance those words with “hawkish” signals. Market Watch notes. He said that the U.S. Central Bank will have to raise the rate higher than could be expected a few months ago. Moreover, Powell made it clear that the issue of rate cuts is irrelevant at the moment. By the way, his words influenced the growth of the current stock price of the NASDAQ-100.
Another Fed official, Board of Governors member Lisa Cook said she believes the regulator needs to keep raising rates as inflation is still too high. “We’ve started to get more favorable inflation data. But I would be cautious about drawing big conclusions on just one month’s worth of data,” Cook said during a speech at the Detroit Economic Club.
Earlier, we reported on how European stock indexes were falling following Asian stock markets.
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