Haitong Securities (6837.HK, 600837.SH) saw its stock price surge by a remarkable 5.23% on Tuesday, propelled by news that its proposed merger with Guotai Junan Securities (2611.HK, 601211.SH) is expected to proceed despite Haitong's recent losses.
The company has been grappling with losses from its legacy Hong Kong portfolio, which has weighed heavily on its earnings since 2022. However, the market's optimism regarding the merger has overshadowed these challenges, as investors anticipate the creation of a stronger entity that can leverage the strengths of both firms.
Guotai Junan, on the other hand, has maintained a solid credit profile, reporting a consolidated net income of around 4.6 billion yuan in the third quarter. S&P Global Ratings expects the merger to create an entity with the same creditworthiness as Guotai Junan, supported by its robust capitalization. Moreover, a faster cleanup of Haitong's Hong Kong portfolio will provide a solid foundation for the merged entity, while Haitong will significantly benefit from Guotai Junan's strong financial standing.
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