Has China finished suppressing the market? Ask Fosun.

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

With no clear policy statement on offer, asset managers have resorted to reading tea leaves. For example, a deal that allows the US Securities and Exchange Commission to review audit documents for Chinese companies listed in New York in Hong Kong could be a sign that China is once again keen on attracting foreign investment. Beijing could also try to appease the capital markets by reviving Didi Global Inc.’s listings. and Ant Group Co.

So far, there have been conflicting signals. Take for example the housing market, where local governments have been fluctuating. Last Thursday, industrial centers such as Qingdao and Suzhou scrapped restrictions on buying used homes and non-residents, respectively, only to fall back the next morning. These hiccups led investors to conclude that President Xi Jinping’s mantra that housing should be lived in, not speculated on, remains consistent. As such, the August mini-rebound in high-yield dollar bonds for real estate developers quickly lost steam. And the French resort group Club Med. Its stocks and bonds have seen a sharp sell-off recently, as global rating agencies downgraded the company, citing refinancing risks.

These risks reflect investors’ fears of government interference. Last week, Fosun’s internal Communist Party Secretary paid a visit to the Beijing branch of Sasak – the State Council’s State-Owned Assets Supervision and Administration Commission – the company said in a statement.

The strong agency has seen selling pressure in some of its portfolio companies recently. In early September, a subsidiary of Fosun pledged to buy a 7.9% ownership stake in Beijing Sanyuan Foods to a brokerage firm. Sanyuan’s largest shareholder is a state-owned company directly supervised by Beijing Sasac.

Fosun said Beijing Sasak has conducted a routine survey to collect information with the company, and the agency has issued such notices to other companies before. The two sides had in-depth exchanges on the long-term cooperation between Fosun Corporation and state-owned enterprises in Beijing.

In another era, investors may have just turned down Fosun’s visit to Sasak. But emerging from a painful crackdown in which little-known government agencies have emerged out of nowhere to wipe billions of dollars off companies’ market values ​​— think the cybersecurity watchdog’s tough stance that eventually led to the delisting of passenger giant Didi from New York — merchants are understandably fickle.

If we use the loan-to-value ratio as a measure of financial soundness, at 39%, Fosun’s balance sheet is good for a holding investment company. However, with not enough cash on hand and closing access to the dollar bond market, Fosun has to rely on bank loan refinancing and rapid asset disposal to meet its short-term obligations. It will resolve about 53% of its debt within a year, according to S&P Global ratings. In other words, Fosun’s ability to withdraw its investment quickly is critical.

With just 117 billion yuan ($17 billion) in debt, Fosun is nowhere near as indebted as Chinese developers. However, the company is important because it is a key gauge in the high-yield corporate bond market. Last year, when property developers collapsed — about a third of the 100 largest builders defaulted or sought loan extensions — Fosun became the natural destination where investors could park their money. It has size, liquidity and – until recently – a decent credit rating. Fosun holds about $4 billion in dollar bonds, with the smallest being issued at $450 million. It used to be a BB rated company.

Now, this safe haven may not be safe. The high-yield dollar corporate bond market also blew up further.

When a company is heading into distress, credit analysts can always point the finger at one metric or another, saying that cash flow management can be better. However, even the best private companies can go wrong if the government becomes overzealous or meddling.

In the capital markets, the Chinese government does not have the best reputation at the moment. If Beijing still wants foreign capital, it should tell its various agencies to stay low and keep quiet. Their unjustified visits with businessmen frighten investors.

More from Bloomberg Opinion:

• Private Equity Giants Facing Cash Flow Problems: Chole Ren

• Cessation of Chinese stock listings is a gain for the United States: Editorial

• Xi Jinping sends mixed messages to investors: Shuli Ren

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

Shuli Ren is a columnist for Bloomberg Opinion covering the Asian markets. Previously, she worked for an investment bank, and was a markets reporter at Barron’s. She is CFA certified.

More stories like this are available at bloomberg.com/opinion

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