Firm dismisses 'speculation' about credit risks
The market value of Wanda Film Holding Co, a Shenzhen-listed arm of Dalian Wanda Group Co, shrank by about 6.6 billion yuan ($966 million) after its shares dropped by close to the 10 percent daily limit on Thursday.
Trading of the shares was suspended at 1 pm on the Shenzhen bourse due to the circulation of information about the company that might impact its share price. Wanda-issued bonds also dropped 2 percent.
Wanda Film said in a filing sent to the Shenzhen bourse that trading will resume on Friday.
There has been speculation recently about credit risks surrounding the Wanda Group, including rumors that some banks, such as China Construction Bank, had issued a notice to dump Wanda's bonds. But Dalian Wanda Group Co said in a statement posted on its website on Thursday that "banks such as China Construction Bank have never issued such notices, and speculation online is just rumors."
The company held a telephone conference with its investors on Thursday afternoon to ease investors' concerns, according to financial news portal caixin.com.
Wanda said all operations are normal.
An unnamed employee at Industrial and Commercial Bank of China (ICBC) said bonds in the company hadn't been dumped, according to news portal sina.com.cn.
"Investors will choose to sell off first for safety when they hear rumors about domestic banks dumping Wanda's bonds," Qiu Yanying, an investment director at Beijing-based Pinjin Asset Management Co, told the Global Times on Thursday.
Qiu said the drop in market value would not affect the firm's liquidity, but it would be dangerous if banks were to suspend lending to the company.
Shares in billionaire Guo Guangchang's Shanghai Fosun Pharmaceutical Group Co and related companies also declined in Shanghai and Hong Kong. Shanghai-listed Fosun declined 8 percent while its shares in Hong Kong slumped 6 percent on Thursday.
Shares in Hong Kong-listed HNA Holding Group Co declined more than 6 percent.
Risk control
The China Banking Regulatory Commission (CBRC) in June asked some domestic banks to provide detailed information on overseas loans to some domestic companies including Wanda, HNA Group, Shanghai Fosun and Anbang Insurance Group, along with Zhejiang Rossoneri, which is part of the group that bought AC Milan in April 2017, according to Bloomberg on Thursday.
Most of the companies are private, and have made large investments overseas during recent years.
From January 2015 to March 2017, HNA Group spent a total of $25.5 billion on 28 investment projects overseas, in areas such as aviation, hotels, real estate and finance, thepaper.cn said in May.
After close of trading on Thursday, HNA Group, Shanghai Fosun Pharmaceutical Group Co and Fosun International said they were operating normally, media reports said.
The CBRC made the request in order to control possible risks, according to caixin.com.
Moves by banks to check on these companies in terms of credit and risks, as required by the CBRC, is in line with the nation's current policy of preventing systemic financial risks and controlling foreign exchange reserves, Yang Delong, chief economist at First Seafront Fund, told the Global Times on Thursday.
"Large domestic private enterprises like Wanda have higher liability ratios and leverage compared with other companies, which is more likely to trigger risk if not controlled well," Yang said.
"Given the frequent overseas acquisitions by these companies, major banks are concerned about potential risks such as excessively high pricing and valuations shrinking after the acquisitions," Sun Jianbo, chief strategist with China Galaxy Securities, told the Global Times on Thursday.
The total value of bonds and medium-term notes issued by Dalian Wanda Commercial Properties Co since July 30, 2015 has reached 87 billion yuan, thepaper.cn reported Thursday, citing data from FinChina, a Shanghai-based data technology firm.
"They should be more cautious in their selection of acquisition targets and should not add too much leverage in future overseas moves," Yang warned.
