Huarong split over investor plan ahead of Hong Kong IPO

Morgan Stanley and Goldman Sachs are in advanced talks to take a stake in China Huarong Asset Management, sources told the South China Morning Post.

Huarong, the biggest of the four funds the central government set up to remove an estimated 1.4 trillion yuan (HK$1.76 trillion) of bad loans from the top four state banks as they prepared for initial public offerings, has reportedly been looking to raise up to US$2 billion by selling a stake of 15 to 20 per cent.

It remains unclear whether Huarong wants to get only one or several new investors in the last round of capital raising before the firm goes public, most likely in Hong Kong next year.

Both Goldman and Morgan Stanley declined to comment. Huarong was not available for comment.

Sources familiar with the situation told the Post that Huarong's senior management was divided over whether to bring in foreign strategic partners before the listing, as many mainland banks have done in the past.

Since Beijing kicked off the reform for the banking industry in 2003, several major banks, including the Big Four, listed their shares in Shanghai and Hong Kong but only after selling a part of their stakes to foreign investors. But this strategy, once considered a normal practice, has come under fire lately as many of these investors have cashed out in recent years.