Is China done with its market crackdown? Ask Fosun.

Global investors are wondering these days if Beijing has decided to loosen a year-long regulatory crackdown that cost them more than $ 1 trillion in losses. After all, China accounts for about a third of the emerging markets benchmark index. It is simply too big to ignore.

With no clear policy statement on offer, asset managers resorted to tea leaf reading. For example, a deal that would allow the US securities supervisor to review the audit documents of Chinese New York-listed companies in Hong Kong could be a sign that China is again eager to attract foreign investment. Beijing may also seek to placate capital markets by relaunching the quotations of Didi Global Inc. and Alibaba Group Holding Ltd.’s fintech subsidiary, Ant Group Co.

So far, there have been mixed signals. Take the real estate market, where local governments are turning upside down. On Thursday, industrial hubs like Qingdao and Suzhou demolished restrictions on the purchase of second-hand and non-resident homes, respectively, only to retrace their steps the next morning. This hiccup has prompted investors to conclude that President Xi Jinping’s mantra that housing must be lived in, not speculated, remains firmly in place. As such, the August mini-rally on real estate developers’ high yield dollar bonds quickly lost ground. Adding to the mix is ​​Shanghai-based private equity giant Fosun International Ltd., whose empire includes an English Premier League football team, Portugal’s largest bank and French resort group Club Med. its stocks and bonds have seen strong sell-offs recently, as global rating agencies downgraded the company, citing refinancing risks.

These risks reflect investor concerns about meddling government authorities. Last week, the Communist Party’s internal secretary of Fosun visited the Sasac branch of Beijing, the State Council of State Assets Supervision and Administration Commission, the company said in a statement.

The powerful agency has recently seen selling pressures in some of its portfolio companies. In early September, a Fosun subsidiary pledged a 7.9% ownership stake in Beijing Sanyuan Foods Co. to an intermediary. Sanyuan’s largest shareholder is a state-owned enterprise directly controlled by Beijing Sasac.

Fosun said Beijing Sasac has conducted a routine information-gathering survey with the company, and the agency has issued such notices to other businesses before. The two sides conducted in-depth exchanges on long-term cooperation between Fosun and Beijing’s state-owned enterprises.

In another era, investors might have simply ignored Fosun’s visit to Sasac. But coming out of a violent crackdown, in which little-known government agencies have sprung up out of nowhere to wipe billions of dollars off companies’ market values, think of the aggressive stance of the cybersecurity watchdog that ultimately led to the delisting of the company. Didi giant from New York: Traders are understandably skittish.

If we use the loan-to-value ratio as a financial security measure, at 39%, Fosun’s balance sheet is healthy for an investment holding company. However, with insufficient liquidity and access to the closed dollar bond market, Fosun must rely on bank loan refinancing and quick asset divestment to meet its short-term obligations. About 53% of its debt will expire in one year, according to S&P Global Ratings. In other words, Fosun’s ability to quickly dispose of its investments is critical.

With just 117 billion yuan (US $ 17 billion) in debt, Fosun is nowhere near the size of indebted Chinese developers. However, the company is important because it is a key barometer in the high yield corporate bond market. Last year, when real estate developers collapsed – about a third of the top 100 developers defaulted or applied for loan extensions – Fosun became the natural destination for investors to park their money. It has scalability, liquidity and, until recently, a decent credit rating. Fosun has approximately $ 4 billion worth of dollar bonds outstanding, with its smallest issue at a respectable $ 450 million. It was a BB-rated company.

Now, that safe haven may not be so safe. And the high-yield dollar corporate bond market has cooled further.

When a business is in danger, credit analysts can always point the finger at one metric or another, saying its cash flow management could be better. However, even the best private companies can go wrong if the government becomes overly zealous or meddlesome.

In the capital markets, the Chinese government doesn’t have the best reputation right now. If Beijing still wants foreign capital, it must tell its various agencies to stay low and keep quiet. Their unsolicited visits with investors scare off business.

More from Bloomberg’s opinion:

• Private equity giants have cash flow problems: Shuli Ren

• Compromise on Chinese stock prices is a win for the United States: Editorial

• Xi Jinping sends mixed messages to investors: Shuli Ren

This column does not necessarily reflect the opinion of the editors or Bloomberg LP and its owners.

Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. A former investment banker, she was a market reporter for Barron’s. She is a CFA charterholder.

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