China Stocks Slump as Report Billionaire Missing Compounds Woesby
Fosun International suspends trading after Caixin report
Turnover wanes in Shanghai as bull-market rebound fades
China’s stocks fell to a five-week low after a Caixin report that billionaire Guo Guangchang was missing added to concerns that slowing economic growth, a weakening yuan and an anti-corruption campaign are clouding earnings outlooks.
The Shanghai Composite Index slid 0.6 percent to 3,434.58 at the close. Closely held Fosun Group, which controls Fosun International Ltd., has “lost contact” with Guo, the magazine said, citing people it didn’t identify. Bonds in Fosun International fell by a record and the company suspended its shares in Hong Kong after the report, while other mainland stocks with ties to Fosun also requested halts. The Hang Seng China Enterprises Index retreated for a seventh day, led by industrial and power companies. The yuan capped the biggest weekly drop since its August devaluation.
President Xi Jinping has waged a battle against corruption since coming to power, while a probe into this year’s $5 trillion stock rout has ensnared officials at the securities regulator, senior staff at Citic Securities Co., and a top fund manager. Data on Saturday will probably show China’s industrial production remained near a six-year low in November, while fixed-asset investment this year slowed to the weakest pace since 2000.
“Since lots of senior managers have gone missing like this case, it has negative implications on the market even though nobody knows what has happened," said Ronald Wan, chief executive at Partners Capital International in Hong Kong. "Investors tend to be more cautious now."
The Hang Seng China index fell 1.5 percent to its lowest level since Sept. 29. Sinopharm Group, which is linked to Fosun Group, China Railway Group Ltd. and China Longyuan Power Group Corp. slumped at least 3.7 percent. The Hang Seng Index retreated 1.1 percent. The CSI 300 Index fell 0.4 percent.
The yuan fell 0.27 percent to 6.4553 versus the greenback, taking its declines to 0.8 percent this week. The central bank has lowered its daily yuan fixing on seven of nine trading days since winning reserve-currency status at the International Monetary Fund on Nov. 30. The onshore spot rate is allowed to trade a maximum 2 percent on either side of the reference rate.
The value of shares traded on the Shanghai exchange dropped 41 percent from the 30-day average, as the benchmark equity gauge extended its losses for the week to 2.6 percent.
Companies linked to Fosun lost at least $2.9 billion of value, according to data compiled by Bloomberg. Shares with a market capitalization of about $34 billion, including Fosun International and Shanghai Fosun Pharmaceutical Group Co., were halted from trading.
Fosun International suspended trading pending "release of an announcement containing inside information," while business operations "remain normal," spokesperson Chen Bo said. Guo, 48, built Fosun Group into an empire spanning everything from insurance to holiday resorts through dozens of deals over the past three years, most of them made through Fosun International.
Nanjing Iron & Steel Co., Shanghai Yuyuan Tourist Mart Co. and Hainan Mining Co. suspended trading in Shanghai on “relevant issue” verification, according to the Shanghai Stock Exchange. Some Fosun-invested companies that traded Friday declined. Shanghai Bailian Group Co. fell 1.5 percent, CNFC Overseas Fishery Co. slid 3.8 percent and Zhongshan Public Utilities Group Co. dropped 2.5 percent.
Missing executives are becoming more common in China. Guotai Junan International Holdings Ltd. shares plunged 12 percent in Hong Kong on Nov. 23 after the brokerage said it couldn’t contact its chairman. Hunan TV & Broadcast Intermediary Co. slid 4.6 percent in Shenzhen on Friday after saying it lost contact with its board secretary.
A bull-market rebound in mainland stocks is fading as turnover slumps and economic data paint a picture of worsening growth. Profits at Chinese industrial companies dropped 4.6 percent in October and manufacturing conditions deteriorated last month to the weakest level in more than three years, while earnings have trailed analyst projections at a majority of index companies for eight straight quarters. The number of new stock investors in China dropped 6 percent last week to the lowest level in a month.
China’s retail sales probably increased 11.1 percent in November from a year earlier, according to the median economist estimate in a Bloomberg survey. Industrial production likely rose 5.7 percent from October’s 5.6 percent, while fixed-asset investment for the January through November period may have slowed to 10.1 percent, projections showed before the National Bureau of Statistics releases the data Saturday at 1:30 p.m. in Beijing.
China’s broadest measure of new credit rebounded in November, according to data released on Friday after the market close. Aggregate financing rose to 1.02 trillion yuan ($158 billion) in November. That compared to the median forecast of 970 billion yuan. New yuan loans climbed to 708.9 billion yuan, while M2 money supply growth was 13.7 percent from a year earlier.