(Yicai Global) Aug. 17 -- Shares of China Huarong Asset Management plunged after the troubled state-owned financial giant said it expects a net loss of CNY18.9 billion (USD2.8 billion) in the first quarter of the year.

Huarong [HKG: 2799] was trading down 15.9 percent at 29 Hong Kong dollar cents (4 US cents) as of 2.45 p.m. today, giving it a market capitalization of HKD23.3 billion (USD3 billion). The stock slumped about 72 percent since resuming trade after a nine-month suspension due to a debt crisis in January.

Huarong fell into the red in the six months ended June 30 due to credit impairment losses and a significant fair value drop of financial assets held by the company, caused by the rebound of the pandemic and capital market volatility amid geopolitical conflicts, the Beijing-based firm announced yesterday. It reported CNY158 million (USD23.3 million) in net profit a year earlier.

Affected by the macroeconomic and real estate industry downturn, the performance ability of customers decreased, Huarong added, noting that the company's credit impairment loss increased significantly in the first half versus the same period last year.

Huarong also announced yesterday to sell its entire 76.8 percent stake in Huarong International Trust to China Trust Protection Fund for CNY6.2 billion (USD920 million) to focus on its main business.

Following the debt crisis in 2020, Huarong sold its equity in several units, including Huarong Zhongguancun Distressed Asset Exchange, Huarong Consumer Finance, and Huarong Xiangjiang Bank. Last December, the company introduced five shareholders, including state-owned financial giant Citic Group, to defuse its financial risks.

Yesterday Huarong also said that it signed a framework agreement with Citic Group, agreeing that the pair will raise the maximum amount of financing and asset transactions between each other by 2024. Citic Group holds a 23.5 percent stake in Huarong, being the firm’s second-largest shareholder after the Ministry of Finance with 27.8 percent.

Editor: Futura Costaglione