Doubts about the financial strength of Chinese Fosun, the owner of Club Med

The owner of Club Med is in turmoil. Fosun, one of the main Chinese conglomerates, which owns dozens of companies in real estate, finance, tourism and pharmaceuticals, is the subject of a warning from its national banking regulator. According to the Bloomberg agency, Chinese financial institutions have received a call to examine their exposure to the Chinese group, indebted to the tune of 260 billion yuan (37.4 billion euros).

After the release of Bloomberg’s information on Tuesday September 13, Fosun shares tumbled 9.6% on the Hong Kong Stock Exchange on Wednesday September 14 to their lowest level since 2012 before recovering 4% on Thursday September 15 . Undermined by the repeated defaults of real estate developers like Evergrande, investor confidence in large Chinese groups is at its lowest this year. But the case of Fosun reveals a risk of contagion to other sectors.

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Group leader Guo Guangchang promised to sue Bloomberg: « This false information from Bloomberg News has seriously damaged Fosun », he denounces in a press release published on the social network Weibo. The company is also downplaying the accusations, presenting the regulator’s recommendations as “routine information gathering”.

All-out acquisitions, then disposals

But, for investors, doubts about the health of the conglomerate were stoked by the sale of the group’s stake in a pharmaceutical company on September 2. Since this announcement, Fosun’s share price has lost 18%. Fosun justifies its asset sales by a desire to focus on its preferred sectors. Pharmacy is precisely one of the group’s core activities. The Fosun Pharma branch, for example, distributed the BioNTech vaccine in Hong Kong and Macao. The sale looks more like a desperate maneuver to raise cash than a refocus, from a company that Moody’s says must pay off 45% of its debt by March 2023.

Fosun looks like the last survivor of a bygone era. Created in 1992 by Guo Guangchang, the group had grown from 2010, multiplying acquisitions in all directions: in a few years, the group had bought Club Med, the English football club Wolverhampton Wanderers, or the largest Portuguese bank, Millennium BCP.

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To the point of attracting the wrath of the authorities, worried about the financial risks taken by these Chinese giants fond of acquisitions, such as the promoter Wanda, the insurer Anbang, or HNA, another conglomerate present in dozens of sectors. These last three have all been dismantled, partially or totally. But, among these groups qualified as « gray rhinoceros » (obvious risks, but difficult to contain) by the Chinese state media, Fosun was seen as a relatively good student, with solid finances.

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