Guo Guangchang’s empire under scrutiny as Fosun shares fall

Fosun International shares have lost nearly one-fifth of their value this month since the announcement of the divestment of a core unit, putting the nearly $40bn of debt amassed by Chinese billionaire Guo Guangchang under increased scrutiny.

Fosun International’s Hong Kong-listed shares closed at their lowest point since December 2012 on Wednesday after losing 18 per cent since September 2, the day the group announced the partial divestment of a core Chinese pharmaceutical unit.

The Shanghai-based tycoon had made aggressive acquisitions to build an expansive business empire that includes English football club Wolverhampton Wanderers, Portugal’s biggest bank Millennium BCP and French resort group Club Med.

But Fosun has been subject to increasing scrutiny from rating agencies and investors over its debt in the past several months. The Financial Times reported in July that Moody’s estimated Fosun’s total consolidated debt stands at Rmb260bn ($38bn), though the company maintained at the time it was in a “sound and healthy” financial position.

Market sentiment deteriorated this week after Bloomberg reported that Chinese securities regulators asked some large Chinese lenders and state-owned companies to examine their business exposure to Fosun.

Fosun denied that banking regulators had made such an instruction.

In a statement to the FT, the group downplayed the checks from the State-owned Assets Supervision and Administration Commission as “routine information collection work by the Beijing Sasac system, without any specificity.”

The scrutiny over Guo’s business empire comes amid strains between President Xi Jinping’s government and China’s business leaders. The Chinese Communist party is depending on businesses to reignite sputtering economic growth but it has simultaneously reasserted itself over corporate leaders through a years-long anti-corruption crackdown and by imposing sweeping regulations to promote economic equality.

In a rare public post on Chinese social media platform Weibo, Guo wrote on Tuesday he had returned to Shanghai after a months-long tour of nearly 40 cities in more than 20 countries.

Despite the fact that more than half of the company’s assets and staff are stationed overseas, “Fosun is a company rooted in China, and China will forever be the citadel of Fosun,” Guo said.

Earlier this month, Fosun entities disclosed their intention to pare back holdings in cornerstone listed healthcare unit Shanghai Fosun Pharmaceutical by 3 per cent. The unit’s stock price in Shanghai has since fallen 16 per cent by Wednesday’s close.

The divestment of core assets surprised investors, after the company had pledged to focus on cutting its positions in non-core groups, including in US insurance group AmeriTrust Group, Tsingtao Brewery, Zhongshan Public Utilities and Shandong Taihe Water Treatment Technologies.

Gong Ping, chief financial officer of Fosun International, defended the moves as part of a normal “financial strategy of balancing investment and divestment”.