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China’s Wanda Denies Rumors as Shares, Bonds Slide Sharply

Variety logo Variety 6/22/2017 Patrick Frater
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Shenzhen-traded shares in Wanda Film Holding tumbled 9.9% in heavy trading on Thursday, as investor sentiment cooled sharply.

There was a similar sell off in Hong Kong of the commercial debt belonging to Wanda Properties International. That was down by over 10% at one point.

The parent company, Dalian Wanda attempted to reassure investors with a statement that blamed mischievous market rumors.

“Today, someone on the Internet viciously speculated that some banks, including China Construction Bank, issued a notice to dump Wanda’s bonds. After investigation, banks such as China Construction Bank have never issued such notices, and speculations online are just rumors. We hereby state that all operations are fine, and we sincerely hope that people will not trust or circulate rumors,” the company said.

Share trading in Wanda Film was suspended at 1pm when the stocks stood at RMB51.93 apiece. That compares with a 12-month high of RMB81.96 and a 52-week low of RMB49.02. At the current valuation the film business is valued at RMB44.3 billion or $6.41 billion.

“We don’t know if this is true yet. The most important factor of doing business in China is the company’s political stance. It is important for the company to ’stand at the right side’. Political risks are the factor that is most difficult to evaluate in China. Even it is just a rumor, investors will choose to sell off first,” said Castor Pang, high-profile financial analyst and head of research at Core-Pacific Yamaichi HK, quoted by Bloomberg.

The stock and bond sell-offs came only days after the group unveiled a massive film production and distribution slate with more than 25 titles for the next 18 months. It also struck a strategic intellectual property development agreement with social media and games giant Tencent.

The stock slide also followed a period of 12 months in which the Chinese box office has exhibited only single digit growth, following an almost unbroken decade of expansion with compound annual growth of over 20%. The theatrical slowdown also comes despite a massive cinema opening program headed by Wanda Cinema Line.

Wanda is now the world’s largest movie theater operator. It is the market leader in mainland China, controls AMC and Carmike in North America, Hoyts in Australia, Odeon UCI in West Europe and Nordic Cinema in northern Europe.

There has regularly been corridor talk suggesting that the group has heavy borrowings. The extent of these is difficult to assess, as the group comprises a privately held parent company with various listed subsidiaries.

Wanda appeared to be targeted by China’s financial regulators late last year, when currency controls particularly sought to curb overseas expansion in film, hotels and property. All three are core businesses for the group.

The negative sentiment may also have hurt Fosun International, another conglomerate which stretches from property and industrial investments to entertainment. Its Hong Kong-traded shares fell 5.8% to HK$11.74 on elevated trading volumes. The group is the largest investor in Studio 8 and has major stakes in Cirque du Soleil and Club Med.

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