Fear of a tightening by Chinese regulators sends Fosun shares plunging

Club Med’s parent Fosun, one of China’s largest private sector conglomerates, saw its value plummet by billions of dollars on Wednesday as investors worried about a scrutiny of the group by regulators , despite a vigorous denial of the conglomerate.

The group’s main company, Fosun International Limited, fell as much as 9.6% in Hong Kong mid-trading on Wednesday morning to trade at HK$4.41, its lowest level since November 2012.

It then erased some of those losses, ending the day down 6.6% at HK$4.56.

This plunge reflects the nervousness of investors after information from Bloomberg News. Citing unnamed sources, the agency reported on Tuesday that Chinese authorities, including the banking watchdog, have asked major banks and state-owned companies to take a close look at their financial exposure to Fosun.

Fosun’s chief financial officer, Alex Gong, said Tuesday evening that Bloomberg’s information was “completely false”.

“Neither the China Banking and Insurance Regulatory Commission (CBIRC) nor the Shanghai Banking and Insurance Regulatory Commission have asked commercial banks to inquire about Fosun’s financial exposure, nor have these institutions received no notice about it,” Gong told the Hong Kong daily South China Morning Post.

– “Unilateral vision” –

In a press release, Mr. Gong explained that while the group has sold stakes recently, it acted in “the continuity of its financial strategy of balancing investment and divestment in recent years” and not to find cash for face difficulties. He lamented that the public took a “one-sided view” of these transfers.

Statements that were not enough to allay the fears of investors.

The level of indebtedness of Chinese companies, particularly those in the real estate sector, is a growing concern.

Several construction giants, including Evergrande, defaulted on their debts and were forced into major restructuring.

A prolific acquirer of global assets, Fosun has owned the French brand Club Med, a pioneer of village-clubs, since 2015. The group also holds a majority stake in the fashion house Lanvin, and has a monopoly on the distribution of the coronavirus vaccine. BioNTech in China.

It also counts Premier League football club Wolverhampton Wanderers among its assets and produces Cirque du Soleil.

According to Bloomberg, Fosun must repay about $8 billion in bonds through 2023.

The CBIRC’s latest request does not mean it wants lenders to change their funding, and the authorities’ move may not result in any action, the agency notes.

Fosun’s debt stood at 261 billion yuan ($37.7 billion) as of June 30, up from 237 billion yuan at the end of last year, according to a financial report released last month.

Fosun dollar bonds also lost six cents on Wednesday, adding to declines a day earlier, the biggest since a rout in June.

In August, Moody’s downgraded the group’s rating citing weak liquidity and a weakening portfolio amid asset sales.

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