Two HNA units crash as trading resumes after six-month halt, wiping out US$1.6 billion in value

Two units of China’s indebted conglomerate HNA Group have plummeted in Shenzhen when trading resumed following a six-month halt, wiping out 10.7 billion yuan (US$1.6 billion) in market value, an inauspicious sign for shares of five other units that remain suspended.

HNA-Caissa Travel Group fell by the daily 10 per cent limit to 11.61 yuan immediately after the market opened on Thursday, erasing 1 billion yuan from its market capitalisation.

The travel service unit said late Tuesday it had scrapped a plan to buy a near 60 per cent stake in E-Life Financial, a finance unit of HNA Tourism Group, due to “big changes in industry-related policies and the securities market environment” while the synergy effect from the planned merger was “pending further discussion”.

Bohai Capital Holding, another HNA Group unit, also dropped 10 per cent when it resumed trading on Tuesday, and fell further by 9 per cent on Wednesday.

By Thursday close, it had lost an additional 9.7 per cent to 4.27 yuan. Its market capitalisation has evaporated by 9.7 billion yuan in the three trading days.

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A total of seven listed units of the group in mainland China have suspended trading since earlier this year amid investor concerns about the financial distress that HNA is facing.

The five companies which remained suspended are Hainan Airlines Holding, Hainan HNA Infrastructure Investment Group, Tianjin Marine Shipping, CCOOP Group, and HNA Investment Group.

HNA also has shareholdings in several Hong Kong-listed companies including HNA Technology Investments, CWT International and HNA Infrastructure.

Earlier this month, the group’s US dollar-denominated corporate bonds, maturing this year, fell by the most in six months after former co-chairman Wang Jian fell to his death in an accident in France.

HNA Group is one of the fastest growing companies on Fortune’s Global 500 list of the largest corporations, having snapped up about US$40 billion worth of properties, hotels, and stakes in financial companies around the world.

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Questions were also raised about the ultimate owner of the privately-held group, which has funded the global acquisitions with massive debts.

On July 6th, the group appointed co-founder and co-chairman Chen Feng as chairman, absorbing the duties of Wang. It did not provide details on how to deal with Wang’s 15 per cent stake after his death, although it said in a statement that Wang has “pledged to donate all of his shares … upon resignation or death” to the two charitable organisations that control HNA.

The two organisations, Hainan Cihang Charity Foundation and Hainan Province Cihang Foundation, hold a combined a 52.25 per cent stake in HNA.