Guotai Junan Securities (GTJA) saw its stock soar by an impressive 6.50% on Wednesday, driven by positive market sentiment surrounding the company's proposed merger with Haitong Securities. The rally comes after S&P Global Ratings assessed that the merger is likely to proceed smoothly, despite Haitong incurring losses from its legacy Hong Kong portfolio.
According to S&P's analysis, while Haitong has faced challenges due to losses from its Hong Kong portfolio, the rating agency believes that the parent-level profits are recovering, and a faster cleanup of the portfolio will provide a solid foundation for the merged entity. S&P expects the combined 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. S&P notes that the merger will significantly benefit Haitong Securities given Guotai Junan's solid credit profile, further fueling positive market sentiment surrounding the deal.
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