UPDATE 1-China's embattled Huarong to delay earnings results again as auditors need more time

(Adds source information on potential timing, analyst comment)

HONG KONG, April 26 (Reuters) - China Huarong Asset Management said it will miss an April 30 deadline to file its 2020 earnings results as auditors need more time - a second postponement that is likely to prolong uncertainty for its jittery investors.

Huarong, one of China’s four biggest distressed asset management firms, had first planned to release results on March 31 but delayed that announcement, citing the need to finalise a “relevant transaction”. That led to a suspension in trade of its shares and a selloff in its bonds.

It could release earnings as soon as next month and the filing would definitely happen before the end of August when interim results are due, said a source familiar with the matter.

The source was not authorised to speak to media and declined to be identified. Huarong did not immediately respond to requests for comment on Monday.

Huarong said in its Sunday statement via an official bond information website that it was operating stably and business operations were normal.

The Hong Kong stock exchange requires companies to file earnings results by March 31 and publish their annual report by April 30. A representative for the bourse declined immediate comment.

Hurt by failed investments and aggressive expansion, Huarong has been in restructuring talks since 2018. Its former chairman, Lai Xiaomin, was executed in January after a graft probe. It had a market value of some $5 billion at the time of its shares’ suspension.

Concerns that restructuring of Huarong’s debt could lead to a possible rerating and repricing of the world’s second-biggest bond market have weighed on yuan debt markets.

The cost to insure exposure to China’s dollar debt remained elevated on Monday, with five-year credit default swaps (CDS) around 39 basis points, up from 32 in early April .

Market worries were somewhat soothed last week by a media report that the People’s Bank of China (PBOC) was looking at buying Huarong assets through an onshore vehicle.

But a source has told Reuters that such discussions long predated market woes and remain unresolved.

“If the ‘distressed-asset’manager becomes itself distressed, it is reasonable to cast doubt on the vulnerability of the financial system,” ANZ Research said in a report on Monday, adding that Huarong could be seen as an underwriter of non-performing loans for the banking system.

But it also said that China’s cyclical outlook did not point to a significant deterioration of credit quality in the banking system and the country had the capital to dispose of non-performing loans in an orderly way.

Earlier this month, sources told Reuters that Chinese regulators have asked some banks not to withhold loans to embattled firm as part of support measures to stabilize its cash flow and reduce the risk of market contagion.

Reporting by Donny Kwok in Hong Kong and by Cheng Leng in Beijing; Editing by Vidya Ranganathan and Edwina Gibbs