China Huarong shares dive after warning of $5.4 billion loss for 2022

Shares of Huarong tumbled as much as 9.3 per cent in Hong Kong in early trading on Monday. PHOTO: AFP

SHANGHAI – Shares of China Huarong Asset Management plunged on Monday after the bad-debt manager forecast a massive loss for 2022.

The Beijing-based company expected a net loss of about 27.6 billion yuan (S$5.4 billion) for 2022, according to a statement to the Hong Kong exchange on Sunday, attributing the shortfall to factors including volatility in the capital market that led to declines in the value of some assets.

Shares of Huarong tumbled as much as 9.3 per cent in Hong Kong in early trading on Monday, heading for the lowest close since the end of December 2022. China Huarong shares ended 3.49 per cent down at 42 Hong Kong cents on Monday.

Huarong’s US dollar bonds were indicated slightly lower during Monday morning trade after the profit warning. As at 10.38am Hong Kong time, its subordinated perpetual bond is 0.9 cent lower at 84 cents on the dollar.

Other reasons for the estimated losses included an adverse macroeconomic situation and a downturn in the domestic real estate industry, which resulted in increased provisions for credit impairment losses, according to the statement.

Huarong roiled Asian credit markets in 2021 as it failed to release its annual report on time, eventually revealing a massive loss for 2020. It later received a US$6.6 billion (S$8.9 billion) government-orchestrated bailout.

In a press release on Sunday, Huarong said it would continue to slim its business and focus on its core operations of bad debt management. Huarong took over 30.6 billion yuan worth of bad loans from smaller banks in 2022.

The forecast loss for 2022 compares with a profit of 370 million yuan a year earlier. In the second half of 2022, Huarong saw a “positive momentum” in its businesses compared with the first six months, trimming its losses by around 10.1 billion yuan.

China suspended the operations of Deloitte Touche Tohmatsu’s Beijing office for three months and imposed an unprecedented fine on the firm over lapses in its auditing work of Huarong from 2014 to 2019. It also fined Huarong itself and seven of its subsidiaries. BLOOMBERG

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