Geely Automobile shares soared as a result of its parent’s bid for Volvo

Article by Christian A., on August 26, 2010

Analysts say that if Geely Automobile's parent, Zhejiang Geely Holding, succeeds in its bid to acquire the Volvo Unit from Ford Motor Co., then it would gain a valuable brand but it could take years before profits are seen. The shares of Geely Automotive have soared ever since news of the bid was announced.

Geely, which means "lucky" in Chinese, would benefit much from modern and innovative technologies that can upgrade its cars to tap the rising affluent auto market in China.

Chen Qiaoning, an analyst with ABN AMRO TEDA Fund Management, said that the market remains divided on the Geely deal.

There are some who believe that if Geely won´t be able to manage Volvo well, then there would be dire consequences.

Geely, which had a reputation of making the cheapest cars in China, would benefit from the purchase through the availability of new technology and better brand recognition.

The broader market has slipped but Geely's stock has risen fourfold this year, the highest point being reached last Thursday.

This increase can be attributed to Ford's announcement last Wednesday that Zhejiang Geely Holding Group is its preferred bidder for Volvo.

Topics: volvo, geely, shares

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