Fitch Ratings Withdraws Guangzhou Asset Management Co.'s Credit Rating with Stable Outlook

Fitch Ratings has withdrawn the credit rating of Guangzhou Asset Management Co., Ltd. GZAMC and affirmed its rating at 'BBB' with a stable outlook.

The decision follows an analysis of several key factors including the parent-subsidiary relationship, strategic incentives, operational incentives, and legal incentives between GZAMC and its parent company Guangzhou Yuexiu Financial Holding Group Co., Ltd. GYFH.

GZAMC is owned by GYFH with a stake of 67 as of June 30th, 2023, which itself is majority-owned by the Guangzhou municipal government holding approximately 47. The city's financial services conglomerate has four core businesses: financial services, real estate, transportation infrastructure and food.

GZAMC operates within GYH’s financial-service segment. Fitch Ratings concludes that there is a strong linkage between the two entities based on their parent-subsidiary relationship, given GZAMC's relatively weaker credit quality and the presence of high strategic incentives and medium operational incentives for GYH to support its subsidiary in times of need.

Notably, however, despite these incentives, the 'low' legal incentive is present due to the fact that GYH has not provided formal legal guarantees or other forms of extensive support for GZAMC's total debt. Moreover, there are no predefined debt instrument triggers between them among their existing financing agreements.

Fitch Ratings believes that the rating affirmation reflects the company’s stable business performance and supportive economic environment in Guangzhou city, despite challenges posed by uncertnties due to its relationship with the parent company.

Overall, GZAMC's credit rating has been firmly rooted at 'BBB' with a stable outlook, which underscores Fitch's confidence in the entity's ability to manage its financial risks while operating within the broader economic framework of Guangzhou city and China as a whole.

This signifies that despite being influenced by the municipal government-owned parent company, GZAMC mntns an indepent credit profile that contributes positively towards its rating. This is based on the balance between strategic support from GYH and the limitations in formal legal obligations.

Fitch Ratings remns closely monitoring GZAMC's operations along with its parent company’s strategies to ensure comprehensive understanding of any potential shifts in their relationship dynamics which could impact the rating outlook further.

This rating update reflects Fitch's commitment to providing consistent, detled insights into credit ratings across a multitude of sectors including national public finance, supranationals and agencies worldwide. If you have questions or require more information about our rating methodologies, privacy policies or any other aspect related to our services, please visit the respective sections on our website.

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