(Bloomberg Opinion) — Global investors are wondering these days if Beijing has decided to ease a yearlong regulatory crackdown that has cost them more than $1 trillion in losses. After all, China accounts for about one-third of the emerging markets benchmark index. It’s simply too big to be ignored.
With no clear statement of policy on offer, asset managers have resorted to reading tea leaves. For instance, a deal that would allow the US securities watchdog to review the audit documents of New York-listed Chinese companies in Hong Kong could be a sign that China is again eager to attract foreign investments. Beijing can also try to appease capital markets by reviving the listings of Didi Global Inc. and Alibaba Group Holding Ltd.’s fintech affiliate, Ant Group Co.
So far, there have been mixed signals. Take the housing market, where local governments have been flipflopping. Last Thursday, industrial hubs such as Qingdao and Suzhou scrapped second-hand and non-resident home purchase restrictions, respectively, only to backtrack the morning after. These hiccups prompted investors to conclude that President Xi Jinping’s mantra that housing is to be lived in, not speculated upon, remains firmly in place. As such, August’s mini-rally in property developers’ high-yield dollar bonds quickly lost steam.Adding to the mixed bag is Shanghai-based private equity giant Fosun International Ltd., whose empire includes an English Premier League football club, Portugal’s biggest bank and French resort group Club Med. Its stocks and bonds witnessed sharp selloffs recently, as global ratings agencies downgraded the company, citing refinancing risks.
Those risks reflect investor worries over meddlesome government authorities. Last week, Fosun’s in-house Communist Party secretary paid a visit to the Beijing branch of he State-Owned Assets Supervision and Administration Commission of the State Council — the company said in a statement.
Fosun said Beijing Sasac conducted a routine information-collection survey with the company, and the agency has issued such notices to other enterprises before. The two parties conducted in-depth exchanges on the long-term cooperation between Fosun and Beijing’s state-owned businesses.
If we use loan-to-value ratio as a measure of financial safety, at 39%, Fosun’s balance sheet is healthy for an investment-holding company. However, with not enough cash on hand and dollar bond market access closed, Fosun must rely on bank-loan refinancing and speedy asset disposals to meet its short-term obligations. About 53% of its debt will mature in a year, according to S&P Global Ratings. In other words, Fosun’s ability to quickly divest its investments is crucial.
Now, that safe haven may not be so safe. And the high-yield corporate dollar bond market has chilled some more.
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Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. A former investment banker, she was a markets reporter for Barron’s. She is a CFA charterholder.