Shares of Guotai Junan Securities (GTJA) surged 6.42% on Tuesday, driven by positive market sentiment surrounding the company's proposed merger with Haitong Securities. Despite Haitong incurring losses from its legacy Hong Kong portfolio, a recent assessment by S&P Global Ratings suggests that these losses are not expected to prevent the merger from proceeding.
The rating agency believes that Haitong's parent-level profits are recovering, and a faster cleanup of its Hong Kong portfolio will provide a solid foundation for the merged entity. S&P expects the merged company to have the same creditworthiness as GTJA, supported by GTJA's robust capitalization.
The Shanghai government-backed merger is seen as a strategic move to create a global investment bank and strengthen the city's position as an international financial hub. According to S&P, the merger will significantly benefit Haitong Securities given Guotai Junan's solid credit profile.
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