Maybe this is Chinese family value. Citic Group, the parent company of Citic Pacific, is assuming all liabilities of Citic Pacific’s FX derivative trades and giving Citic Pacific a loan of HKD 11.6 billion, which will be later converted into a convertible bond with a conversion price of HKD 8.00. This is just like a father-son relationship. No matter how naughty the son is, how wrong the son has done, the father is always forgiving and will give unconditional love to the child.
Or maybe it is a question of face. Nothing should go wrong within the Chinese government. With Citic Group being a Chinese government investment arm, nothing should go wrong within the Citic enterprise. The government just wants to end this saga as soon as possible and move on. And hopefully investors will forget it very soon.
Next time, when people see a governmental or semi-governmental company failing and its share price drop, buy the stock as the company will eventually be bailed out by someone higher up and the share price will subsequently go back up!
