Bangkok--19 Nov--Fitch Ratings
Fitch Ratings (Thailand) has downgraded CGS-CIMB Securities (Thailand) Co., Ltd.'s (CGS-CIMB TH) National Long-Term Rating to 'A(tha)' from 'AA-(tha)' and National Short-Term Rating to 'F1(tha)' from 'F1+(tha)'. All ratings have been removed from Rating Watch Negative, on which they were placed on 14 February 2018. The Outlook is Stable.
KEY RATING DRIVERS
The downgrade reflects Fitch's revised view on the institutional support factors that drive CGS-CIMB TH's ratings. Fitch now assesses that extraordinary support for CGS-CIMB TH is likely to come ultimately from China Galaxy Securities Co., Ltd. (CGS) via CGS-CIMB International Securities Pte Ltd (CGS-CSI) - the direct parent of CGS-CIMB TH - rather than CIMB Group. Malaysian-based CIMB Group Holdings Berhad in January 2018 sold half of its stake in CGS-CSI to China Galaxy International Holdings (CGIH), a subsidiary of CGS, with potential to sell its remaining stake to CGIH. Hence, Fitch believes support from CIMB Group can no longer be relied upon.
Fitch sees CGS-CIMB TH as a core subsidiary to CGS-CSI, as reflected in CGS-CIMB TH's important role as an integral part of CGS-CSI's network in southeast Asia, brand sharing and near-full ownership. Hence, CGS-CIMB TH's rating is driven by Fitch's expectation of institutional support from CGS-CSI. However, Fitch believes CGS's propensity to provide extraordinary support to CGS-CSI is limited by the still-low synergies between the two entities and CGS-CSI's low earning contribution to CGS.
RATING SENSITIVITIES
CGS-CIMB TH's ratings are sensitive to any changes in Fitch's view on CGS-CSI's credit profile, which is in turn sensitive to CGS's ability and propensity to provide support. The ratings could also change in tandem with CGS-CSI's propensity to extend extraordinary support to its Thai subsidiary. For example, a change in CGS-CSI's view of its core market or a significant reduction in ownership or level of commitment to provide financial support could indicate a weakening in support propensity, with a negative effect on the ratings.