(Yicai) Nov. 16 -- Shares of China Huarong Asset Management surged after the country's biggest state-owned bad loans manager said it will buy a 5 percent stake in conglomerate Citic for HKD13.6 billion (USD1.7 billion) and rename itself as China Citic Financial Asset Management.

After soaring by as much as 33 percent in Hong Kong earlier today, Huarong [HKG: 2799] closed 9.6 percent up at 40 Hong Kong cents (5 US cents) a share. Citic [HKG: 0267] fell 0.4 percent to HKD7.20 (90 US cents).

Huarong will buy the equity from Citic Polaris for HKD9.35 a share, the Beijing-based company said in a bourse filing late yesterday, commenting that the move is an important measure to improve the layout of state-owned assets.

The deal will help Huarong improve its asset quality and financial status as well as optimize its business positioning, replenish capital, and boost profitability, it said.

Huarong's business transformation and development will be supported by Citic Group, its largest shareholder with a 27 percent holding, through brand licensing, personnel exchanges, and asset transactions under the principle of marketization and legalization, it noted.

Hong Kong-based Citic is listed on the Hong Kong Stock Exchange’s main board and is a constituent of the Hang Seng Index. Its operating revenue rose 2.8 percent to CNY334 billion (USD46.1 billion) in the first half from a year earlier, while net profit gained 2.3 percent to CNY32.1 billion (USD4.4 billion).

Huarong’s board has approved its new name, which will need the sign-off of shareholders next. The change is expected to leverage Citic Group's brand value, promote business development, and further drive its high-quality transformation and development, the company said.

The board also greenlit the appointment of Xu Jiongwei as vice president, Huarong said. Xu, 48, is an investment banking industry veteran who previously worked at Citic Group-backed China Securities.

Editor: Martin Kadiev