CK Asset pulls out of Fitch Ratings

Business | Avery Chen 10 Jul 2019

Fitch Ratings has withdrawn its rating on CK Asset (1113) as the local property developer has chosen to stop taking part in the process.

Before withdrawal, the credit rating agency had a stable outlook on CK Asset's long-term foreign-currency issuer default with an "A" rating, and gave an "A" rating to its senior unsecured debt. The US$3 billion Euro MTN program issued by CK Property Finance and guaranteed by CK Asset obtained an "A" rating.

Fitch will no longer provide ratings or analytical coverage for CK Asset as it will no longer have sufficient information to maintain the ratings, it said.

A spokesman of CK Asset confirmed that the company has stopped taking part in Fitch's assessment, but it has provided information to S&P Global Ratings and Moody's, adding that the company's finance is still robust and there is sufficient information for financial institutions as references.

Meanwhile, Fitch forecasts China's GDP growth will be 6.2 percent this year, 6 percent in 2020 and 5.8 percent in 2021, as profit growth continues to lag the pace of expansion. There are near-term profitability pressures from narrowing net interest margins and tighter non-performing classification, and the peak impact of US tariffs has not yet to come.

It is also difficult to see a significant earnings improvement for mainland banks as their net interest margin is expected to narrow and China has implemented stricter requirements on non-performing loans, said Grace Wu, senior director and head of Greater China banks at Fitch Ratings.

The rating agency said the recent seizure of Baoshang Bank reflects vulnerabilities of mainland small city banks and rural banks - they have weaker funding and liquidity profiles and are more exposed to shadow-financing activities.

Meanwhile, Katie Chan, director, non-bank financial institutions, said China shadow banking assets relative to nominal domestic GDP continue to contract and Fitch expects the ratio to decline to about 50 percent this year, from 55 percent in 2018 and 68 percent in 2017.

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