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Shares in Chinese conglomerate Fosun drop after Moody’s downgrade cites weak liquidity and property contagion risk

  • Listed units fell in mainland and Hong Kong trading on Wednesday after Moody’s downgraded the company by one notch to a B1 rating
  • Fosun said the rating cut was largely based on an overly pessimistic reading of the broader economy and market conditions

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The company logo of Fosun group. Photo: Handout
Iris Ouyang
Listed units of Fosun, one of China’s largest private conglomerates, fell on Wednesday after Moody’s downgraded the company, citing weak liquidity, a weakening portfolio amid expected acceleration in asset sales, and contagion risk from its property investees.
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Moody’s downgraded Fosun International – the major holding company of the group – by one notch to B1 after the market close on Tuesday.

In Hong Kong, Fosun International dropped 1.2 per cent and has lost 28 per cent year to date. Shanghai Fosun Pharmaceutical shed 3.3 per cent. Fosun Tourism Group lost 4.9 per cent, the biggest daily drop in three weeks. In mainland trading, Shanghai Fosun Pharmaceutical fell 1.9 per cent.

“The downgrade reflects Fosun’s weak liquidity profile, elevated refinancing pressure due to the challenging onshore and offshore funding environment, and the execution risks related to its asset divestment plan amid slower economic growth and capital market volatility,” said Lina Choi, a Moody’s senior vice-president.

The ratings downgrade is a concern for investors who were already spooked by the bankruptcy of HNA Group, blamed on overly aggressive expansion and a complex company structure. Amid a harsh refinancing environment, the downgrade could damage Fosun’s access to funding.
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Credit contagion risk from Fosun’s weak subsidiaries in the property market, including Shanghai Forte Land and Shanghai Yuyuan Tourist Mart, also contributed to the rating cut, Moody’s said. A complicated group structure and inadequate information transparency is also harming the company’s outlook, it added.

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