OREANDA-NEWS. Fitch Ratings has Fitch Ratings has assigned China Orient Asset Management (International) Holding Limited (COAMI) Long-Term Foreign- and Local-Currency Issuer Default Ratings of 'A-' with a Stable Outlook.

KEY RATING DRIVERS

Linked to Parent: COAMI's ratings are credit-linked to those of its parent, China Orient Asset Management Corporation (COAM, A/Stable), one of the four large asset management companies in China. The link reflects COAM's 100% ownership of the subsidiary, strong oversight and supervision by COAM and the strategic importance of COAMI's operation to its parent. These factors result in a strong likelihood that COAM would provide the subsidiary with extraordinary support, if needed. COAMI is classified as a credit-linked public-sector entity under Fitch's criteria.

Parent's Strong Creditworthiness: COAM is one of the four big asset management companies (AMCs) established by the Chinese government to mitigate financial risks, preserve state-owned assets, and promote the reform and development of China's financial system. These AMCs are also the wholesalers for non-performing assets in China. COAM is 100% owned by the Ministry of Finance.

Strategic Importance: COAMI is the major offshore financing and investment platform for COAM. COAMI's contribution to the whole group's net assets, total assets and net profit were 11.3%, 12.8% and 23.6% respectively for 2014.

Parental Integration: The parent has provided credit enhancements, such as keepwell deeds and deeds of equity interest undertaking, to 66.7% COAMI's total debts as at the end of 2015. COAM has also provided CNY5.3bn in shareholder's loans to COAMI, which represents 19.0% of its total debt. As of end-2015, 85.7% of COAMI's debts were either backed by credit enhancement from the parent or shareholder's loans directly from the parent.

Tight Control and Supervision: The members of COAMI's board of directors are directly appointed by its parent. COAMI's financing plan and indebtedness are also closely monitored by its parent. The management of COAMI needs to report it financial and operational performance to COAM on a regular basis. The parent also conducts performance appraisals on COAMI and sends internal auditors to COAMI on an ad-hoc basis.

Moderate Standalone Profile: COAMI shares a similar client base with its parent, and its standalone credit profile is similar to that of COAM. COAMI's credit profile is characterised by concentration in the Chinese real estate sector and potential execution risk due to rapid expansion. Its fast-growing portfolio has yet to weather a full economic cycle and asset quality could come under pressure in an economic downturn. However, Fitch believes the support from its parent and ultimately from the China sovereign (A+/Stable), mitigates the potential risks.

RATING SENSITIVITIES
Linkage with Parent: Significant weakening of COAMI's strategic importance to its parent, dilution in the parent's shareholding, or reduced explicit and implicit parental support, could lead to a wider rating gap between COAMI and its parent. Nevertheless, significant improvement of COAMI's strategic importance, and/or increased explicit and implicit parental support could lead to equalisation of the ratings of COAM and COAMI.