China’s BAIC sinks on report Daimler may raise stake in joint venture

FILE PHOTO: The logo of Beijing Automotive Group (BAIC) is seen during the Auto China 2016 auto show in Beijing, China, April 29, 2016. REUTERS/Damir Sagolj

(Reuters) – BAIC Motor Corp’s (1958.HK) shares slumped 13.5 percent on Wednesday after Bloomberg reported that Germany’s Daimler AG (DAIGn.DE) is considering increasing its stake in its joint venture with the Chinese company.

An increase in stake would echo a similar move by BMW (BMWG.DE), which agreed in October to pay 3.6 billion euros ($4.08 billion) to take control of its main joint venture in China with Brilliance China Automotive Holdings Ltd (1114.HK).

Brilliance China’s shares had slumped nearly 30 percent on that news, with analysts saying the deal would substantially decrease Brilliance’s long-term value even as Beijing starts to relax foreign ownership rules for the world’s biggest auto market.

Owning majority stakes is likely to spur foreign firms to shift more production to China, helping them protect profits amid uncertainty over a trade war between Washington and Beijing.

Daimler has shown an interest in raising its holding in the joint venture to at least 65 percent from 49 percent, Bloomberg said on Tuesday, citing people familiar with the matter.

A 16 percent stake in the venture is likely to be valued at between 2.3 billion euros and 3 billion euros, the report said, citing Christian Ludwig, an analyst with Bankhaus Lampe.

Daimler told Reuters that it does not comment on speculation, adding that it was satisfied with its successful set-up in China and its partnerships.

BAIC denied the report.

Its shares fell 13.5 percent to a low of HK$4.28 but recouped some losses to trade down 10 percent in morning trade. The stock has more than halved so far this year.

Reporting by Sayantani Ghosh in Singapore; Additional reporting by Yilei Sun in BEIJING; Editing by Muralikumar Anantharaman

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