China: Dongfeng stops its shares trading image

This is important news, as the Chinese automaker did it pending an imminent announcement – as we all remember Dongfeng has been for months in close negotiations with its European joint-venture partner PSA to purchase a big stake.

We should hold our speculations for now but since trading stock is not halted for every ordinary announcement we might be finally revealed the official deal between them and PSA. Anyway, a Dongfeng spokeswoman had no additional comment beyond a statement released to the Hong Kong stock exchange, which said that stock trading was halted from 10:04 a.m. today.

After many media reports PSA finally disclosed in January it’s currently seeking to enter and agreement with the French government and Dongfeng, with a formal announcement due somewhere before the French report full-year earnings on February 19. The talks seem to include a proposed an initial capital increase of 3 billion euro ($4.1 billion) to fund the development and reorganization needs – but we still have conflicting news about the size of the stake and if it would dilute the Peugeot family control over PSA.

“It’s a very good opportunity for them (Dongfeng) to have a tighter, closer relationship with a developed country’s automaker,” said Jeff Chung, a Hong Kong-based analyst at Daiwa Securities Group Inc. “ That will help them to diversify geographical risk, product risk and also right now given that they have a lot of cash, Dongfeng Motor still has an upper hand in these negotiations.”

“If we invest in Peugeot, it’ll bring benefits such as technology and other resources that will help us develop our own cars,” Dongfeng General Manager Zhu Fushou said in an interview last month in Beijing. “Peugeot’s main problem is its heavy reliance on Europe, which it should address by shifting focus to emerging markets.”

Besides its existing Chinese joint-venture with Dongfeng that saw them open their third plant in July, PSA also has a local partnership with Chang’An Automobile Group to make DS models and it plans to have an installed production capacity of 950,000 cars in the country by 2015.

Via Bloomberg