OREANDA-NEWS. Fitch Ratings has today assigned Hong Kong-based China Everbright Limited (CEL) a Long-Term Issuer Default Rating (IDR) of 'BBB' and a Short-Term IDR of 'F2'. The Outlook is Stable.

CEL is an asset management company that is 49.74%-owned by China Everbright Group (CEG) as of end-June 2015. CEG is an integrated financial services holding company in China. CEG is wholly owned by the central government of China, through the Ministry of Finance (44.3%) and Central Huijin Investment Limited (55.7%).

KEY RATING DRIVERS

CEL's ratings are driven by Fitch's belief that extraordinary support from CEG would be forthcoming for CEL in the event of stress as CEL is considered a core subsidiary of the group. Fitch assesses CEG as having good credit profile due to its strong linkage with the Chinese sovereign (A+/Stable), the government's 100%-ownership and its strategic role in supporting the nation's goal to establish a full-fledged integrated financial holding company.

CEG is one of just two major financial conglomerates (CITIC Group is the other one) operating in the Chinese financial sector.

CEL is the key offshore asset-management business of CEG. CEL's chairman holds the same position in CEG, a scenario that very few group subsidiaries enjoy. Market participants know CEL is part of CEG because the subsidiary shares the group's name and logo and has been listed in Hong Kong since 1997. CEL is a core and integral part of CEG; its business in asset management is critical to the group fulfilling the aim assigned by the Chinese government of establishing an integrated universal financial services company.

CEL's standalone financial strength is modest, reflecting its high risk profile, which is evident in its rapid asset growth, limited track record in risk control and volatile profitability. This is partly counterbalanced by the company's satisfactory capital and leverage positions.

CEL focuses on primary market investment, secondary market investment, structured financing & investment, aircraft leasing, and strategic investment in mainland China and Hong Kong. It has built substantial cross-border business networks in Hong Kong and mainland China, and established a strong reputation by using the Everbright brand.

RATING SENSITIVITIES

CEL's ratings could be upgraded if CEG becomes more strategically important to the Chinese government.

A rating downgrade could be driven by a weakening in the linkage between CEL and CEG, which could result from significant dilution of CEG's stake in CEL or a reduction of CEL's strategic role in the group. CEL's ratings may also be downgraded if CEG's strategic importance to the Chinese government is substantially lowered.