How China's Crackdown on Conglomerates Is Hitting Their AssetsBy
China’s Communist leadership has tightened the regulatory screws on some of the nation’s largest, private-sector conglomerates in the name of financial stability.
That’s made things a little less stable for investors in some of those companies’ securities. The effects have varied. Bondholders have generally been the worst hit, though stockholders in some of HNA Group Co.’s units have seen shares suspended from trading.
With China’s top banking regulator saying that more steps are coming to rein in empires created through complex ownership structures, here’s a look at some of the impact of China’s crackdown so far.
Debt-laden HNA Group Co.’s bonds have plunged to record lows, and stock-trading halts at several units have added to investor concerns. After taking on billions of dollars in debt while on a global spending spree, regulators around the world are now scrutinizing the conglomerate’s past and pending deals.
A slew of HNA units including HNA Investment Group Co., HNA-Caissa Travel Group Co., Bohai Capital Holding Co., Tianjin Tianhai Investment Co. and flagship Hainan Airlines Holding Co. have suspended their shares from trading this month pending "major" announcements. Another, CCOOP Group Co., has halted its stock since November. HNA Innovation Co. is still trading for now but the stock has wiped out about a third of its value since the beginning of 2017.
Anbang Insurance Group
Fortunes soured for Anbang Insurance Group after authorities detained Chairman Wu Xiaohui in June amid an examination of the company’s sources of funding for overseas acquisitions.
The company, which also amassed stakes in listed Chinese companies as part of its global spree, was asked by authorities to reduce its stakes in China Minsheng Banking Corp. and China Merchants Bank Co. Shares of both dipped in December, but have since recovered the losses amid a broader rally in Chinese lenders on the perception of falling risks of a Chinese financial crisis.
A real-estate group that’s branched out into entertainment through the acquisitions of movie theater operator AMC Entertainment Holdings Inc. and production company Legendary Entertainment, Dalian Wanda Group now faces a cash crunch, with a quarter of its unit Wanda Commercial Properties Co.’s $2 billion in overseas debt due in March. Marquee holding AMC has tumbled 60 percent since the start of 2017, as movie-going fell to the lowest level in 25 years. The chain’s chief executive, Adam Aron, said in December AMC has been approached in the past three months by six companies interested in acquiring stakes or buying theaters.
Wanda’s main property unit saw its credit rating cut to junk by major ratings agencies, and Wanda is selling off real estate holdings in London and Sydney. Chairman Wang Jianlin said Jan. 21 his firm won’t face any defaults worldwide and will pay off all its foreign debt. The group’s Wanda Hotel Development Co. unit said Jan. 23 it had entered an agreement to sell some of its Australian property projects.
Compared with some peers, Fosun International Ltd. appears to have taken the increased scrutiny in stride. Since China codified its rules on overseas investments Aug. 18, shares of the insurance-to-drugs conglomerate are up more than 55 percent. In a September interview, Co-President Xu Xiaoliang said the firm was still on course to expand its global footprint, focusing on sectors the government indicates are good for deals. Authorities even endorsed two of Fosun’s recent purchases, Xu said at the time.