July 7, 2017 3:48 am JST

Rumors of Fosun chief's disappearance spook markets

Investors wary as Chinese companies pay the price for acquisitions abroad

YASUFUMI TSUGE, NQN staff writer

Fosun International plunged early Thursday on rumors of the group chief's disappearance. © Reuters

HONG KONG -- The rumored disappearance of the Fosun International group's chairman sparked a sell-off in related shares Thursday before the billionaire's whereabouts were reported, showing the toll Beijing's recent crackdown on big foreign spenders is taking on investors' nerves.

Guo Guangchang has gone missing before. He vanished from the public eye for days in December 2015, during which time he was said to be cooperating with authorities in an anti-graft probe. Shares in the conglomerate's main Hong Kong-listed unit plunged to the point where trading was suspended.

So claims online that Guo was gone once again weighed heavily on stock investors' minds Thursday morning, sending Fosun International down several percent at one point. A midday corporate statement blasted a Chinese news website's "malicious rumors" as false, saying Guo was presenting at a conference in Xi'an and group operations were normal.

The shares quickly recovered, closing down just 0.2% at 12.02 Hong Kong dollars. Shanghai Fosun Pharmaceutical (Group) pared its losses here to finish 2.6% lower at HK$29.40.

A worrying precedent

Yet investors have reason to worry about what could befall high-flying Chinese executives. Chairman Wu Xiaohui of the massive Anbang Insurance Group disappeared in mid-June when detained by authorities. The group has recently been on a foreign acquisition spree funded by the sale of high-yield insurance products, buying up such properties as New York's landmark Waldorf Astoria hotel.

Fosun has done some similar shopping in recent years, acquiring French resort operator Club Med and taking a stake in Canadian circus troupe Cirque du Soleil. Other investments include a Portuguese insurer and a British soccer club. Guo himself, a disciple of American investor Warren Buffett, has earned a reputation as the Oracle of Omaha's Chinese equivalent.

It came to light in late June that banking regulators had ordered major banks to look into lending to such companies as Fosun, Anbang, and conglomerates Dalian Wanda Group and HNA Group, which have made repeated overseas acquisitions. The main purpose is likely to fend off yuan weakening that could accompany capital outflows, according to strategist Li Xiong of Daiwa Capital Markets in Hong Kong. Keeping the yuan from depreciating past 7 to the dollar is a top priority ahead of the Communist Party's twice-a-decade National Congress this fall, said Li, who noted that stricter financial oversight, including efforts to restrain overseas acquisitions that have little to do with a company's core business, will likely continue until then.

Factional struggles within the Chinese Communist Party are also rumored to be a factor. The National Congress will determine who fills key leadership positions going into the next five years. President Xi Jinping is evidently tightening his hold on the nation's corporate sector -- and investors' concerns have begun to show.

Asia300

Fosun International Ltd.

China

Market(Ticker): HKG(656)
Sector:
Industry:
Non-Energy Minerals
Steel
Market cap(USD): 12,958.24M
Shares: 8,591.87M

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