S&P Global Ratings raised the outlooks on China Orient Asset Management Corp. and its Hong Kong unit, China Orient Asset Management (International) Holding Ltd., to positive from stable.
The rating agency said Dec. 19 that it also affirmed the companies' long- and short-term issuer credit ratings at BBB+ and A-2, respectively.
The outlook revision reflects S&P's view that China Orient Asset Management's leverage will improve in the next 12 to 24 months following a planned capital infusion from strategic investors. S&P expects the company to use the capital injection to grow its core distressed asset management business.
In addition, the positive outlook reflects the agency's expectation that the company will retain its very important role and strong link with the Chinese government, as well as maintain its strong market position and financial stability in the next two years.
The positive outlook on the Hong Kong subsidiary reflects the view that the company will remain a core subsidiary of the parent. S&P notes that the ratings and outlook on the unit move in tandem with that of the parent.
S&P could upgrade the ratings of China Orient Asset Management if the company maintains its risk profile and improves its capitalization. The ratings could also be raised if the rating agency sees a sustainable increase in the company's earnings.
Conversely, the ratings could be lowered if the company grows quickly without commensurate capital replenishment. S&P could also lower the ratings if the company posts lower-than-expected earnings or if its noncore businesses weaken.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.
