In China, Corporate Debt Jitters

Patterns of digital interest surrounding HNA Group may reflect growing concern.

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Global equities markets leapt yesterday after the release of data showing Chinese manufacturing had grown unexpectedly, easing fears of a global economic slowdown. At the same time, however, signals from the digital realm indicate that concerns related to corporate debt in China, a potential source of global financial risk, may be becoming more salient.

Last week, a Predata signal captured a surge in digital interest in HNA Group, one of the four massive Chinese conglomerates that are considered potential “gray rhinos,” which, unlike rare and unexpected “black swan” events, are large and visible and if they start moving too fast have disastrous consequences for the economy.

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Distressed under the weight of foreign acquisitions, HNA, under orders from Beijing, has been selling off holdings. HNA’s largest creditor, China Development Bank, reportedly plans to cut the conglomerate back to its core travel assets and, according to Reuters, possibly move HNA into liquidation later this year.

The spike in digital interest came after HNA sold Hong Kong Express Airlines to Cathay Pacific and Swiss caterer Gate Group to RRJ Capital. The signal had reached such a level only two other times in the past year: once after an HNA board co-chairman perished in a tragic accident in France, and then a second time when HNA was negotiating the sale of a prestigious Manhattan skyscraper. That the sale of the airlines holdings has caused such a large upswing in attention online suggests observers may be jittery about the speed of the selloffs and the risk HNA poses.

Additionally, three other notable gray rhino conglomerates -- Fosun International, Anbang Insurance, and Wanda Group -- have all registered declines in digital interest recently. That the signal for HNA is moving against the larger trend indicates that concerns about the conglomerate are particularly acute.

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