D'Long's Problems May Offer Opportunity for Brave Investors
A credit squeeze gripping one of China's biggest investment companies is spooking investors and raising questions about the way business is being done in the country's stock markets. But there may be some buying opportunities for the brave-hearted.
D'Long International Strategic Investment, founded in 1986 by four siblings named Tang from China's northwestern region of Xinjiang, rode years of easy credit to become one of the country's largest private conglomerates. Its holdings include one of the world's biggest tomato-paste makers, China's foremost heavy-truck manufacturer, and U.S. lawn-equipment company Murray. Altogether, D'Long has stakes in more than 100 Chinese companies in an array of industries, including a dozen securities firms and commercial banks.
This spring, Beijing's credit-tightening measures -- aimed at cooling a hot economy -- coupled with Chinese media reports questioning D'Long's financial health, sent share prices of some of the company's listed affiliates spiraling. The developments set off a chain reaction that threatened to bring down the Tangs' business empire and damped already-weak investor confidence in China's stock market. It also shined a spotlight on questionable practices that are seen as widespread in China's financial industry, from stock-price manipulation to the use of price-inflated shares as collateral for bank loans.
D'Long's predicament "tells us that there still exist big loopholes in China's equity market structure and corporate governance," says Zhang Yong, an analyst for Great Wall Securities.
Chinese prosecutors haven't charged Shanghai-based D'Long with any wrongdoing, and there isn't any indication that the Xinjiang siblings have broken any laws. Some banks and other creditors have filed lawsuits against D'Long, however, and a Shanghai judge involved says the situation "is under further investigation." Some Chinese media have suggested that D'Long ramped up stock prices and then tapped its financial institutions for funding to finance its ambitious expansion -- allegations that company executives have denied.
D'Long Executive Chairman Xiang Hong said in an interview yesterday that the company's problems are a reflection of the immaturity of China's capital markets, which make it hard for private companies to raise money through traditional channels. He says D'Long has reached a preliminary agreement with a dozen outside investors, including 10 major foreign companies and two Chinese state-run companies, to take a combined 60% stake in D'Long as part of a restructuring plan.
Mr. Xiang said D'Long is discussing the plan with central-government authorities and that if they sign off on it, the company could formally unveil the plan as soon as next week. He declined to identify any of the potential investors or to provide other details.
Industry analysts and corporate executives say D'Long's situation offers selective buying opportunities. Mr. Zhang, the analyst, warns that it could have a long-term impact on market sentiment and recommends that institutional investors steer clear of companies that are controlled by, or have close ties to, D'Long. These include Xinjiang Tunhe Investment, the tomato-paste producer, whose Class A shares gained 3.7% to 3.65 yuan (44 cents) yesterday, though the stock is down about 70% over the past three months; and Shenyang Hejin Holding Investment, a power-tool maker that owns Murray and which gained 8.1% to 5.33 yuan yesterday.
But he says some companies that have seen prices unnecessarily battered because of a loose connection to D'Long may present good buys even for conservative investors. These include garment maker Shanghai Matsuoka and Shanghai Industrial Sewing Machine, whose share prices have fallen on reports that they have lost funds because of their relationship with D'Long. The funds at issue "aren't big money for these large companies," Mr. Zhang says. "Excessive market worries have caused these stocks' prices to drop, and they may see a rebound."
Some investors are looking at industrial assets that D'Long is liquidating to pay back creditors. Mr. Xiang declined to say how much D'Long owes, but says its debt-to-equity ratio, a key measure of financial health, is "within 60%." D'Long has financed much of its recent expansion with funds raised from more than 1,000 investors, mostly domestic Chinese companies, and on which it pays higher rates of return than those offered by commercial banks. "It's not a good time to buy [D'Long-related] stocks; it's a good time to buy [D'Long] assets," says a Beijing-based direct-investment company executive, who says he likes its "strong" core assets of auto-parts, tomato-processing and garden-tools businesses.
Still, D'Long's troubles raise wider issues about the health of China's financial sector. Even as further details about D'Long's financing practices remain unclear, many industry analysts say its founders committed a basic error: "It's a classical case of an overextension," says Fred Hu, a managing director for Goldman Sachs. "They got carried away and overextended into so many businesses and industries."
That raises questions about the risk-management of the Chinese banks and corporate investors that helped fund D'Long's expansion. In some cases, D'Long pledged shares of its listed companies as collateral for bank loans. Western banks often try to be conservative in valuing such shares and to require a large margin to offset the higher risk, but many of D'Long's Chinese lenders apparently didn't take such cautionary measures, even amid a national effort to strengthen the risk-management systems of China's bad-debt-ridden banks.
D'Long may not be alone in its problems. Even as China's Communist government has recently moved to improve its policies for private entrepreneurs, most still have trouble securing bank loans, forcing them to resort to more creative ways to raise money. Lang Xianping, a professor at Chinese University of Hong Kong, warned in a recent article that Chinese regulators should pay attention to other big conglomerates that may have similar financial exposure as D'Long.
Shanghai Fosun High Technology (Group), a Shanghai investment company with stakes in more than 100 listed companies, already has seen its affiliates' share prices drop in the wake of publicity about D'Long's problems, with some rebounding last week. A high-level Shanghai Fosun official says, "We definitely won't be the next D'Long," but he admits that Shanghai Fosun is having a tougher time getting bank loans because of Beijing's recent campaign to cool the economy. "It's a problem for all private companies under the current macro-control policy," he says.
德隆系遭重挫蕴含投资良机
中国政府的信贷紧缩政策导致中国一家顶级投资企业陷入危机。这不但打击了中国股市的人气，而且还促使人们对上市公司在中国股票市场上的运作方式提出质疑。不过，在那些不畏风险的投资者看来，这也可能是一个入市买盘的机会。
1986年，唐氏四兄弟在中国西北部的新疆维吾尔自治区创办了德隆国际战略投资有限公司(D'Long International Strategic Investment Co., 以下简称：德隆)。受益于连续几年的宽松信贷环境，该公司成为中国最大的民营企业集团之一。公司旗下有一家全球大型番茄酱生产商，一家重型卡车生产商。该公司还把触角伸到了海外，美国草地设备供应商Murray也是该公司名下的产业。德隆总共持有中国100多家公司的股份，其中，德隆持股的证券公司和商业银行就有十几家之多。
中国政府今年春季为了给经济增长降温相继推出了一系列紧缩信贷的措施，再加上中国媒体也对德隆的财务状况提出质疑，导致德隆系的多只股票连续下跌。由此引发的连锁反应不但导致唐氏兄弟的商业帝国陷入分崩离析的危险境地，也进一步打击了中国股民本已脆弱的投资信心。这一事件还凸现出中国金融界普遍存在的不道德做法，如操纵股价、把股价被人为推高的股票用作抵押物申请银行贷款等。
长城证券(Great Wall Securities)的分析师张勇表示，德隆的问题表明中国股市的结构和企业治理仍然存在著巨大漏洞。
中国检查机关尚未对德隆提出指控，也没有任何迹象表明唐氏兄弟有违法行为。不过，一些银行和债权人已对德隆提起诉讼，据上海一位了解案情的法官透露，此案正在进一步的审理过程中。一些中国媒体指责德隆人为地拉高股票价格，之后用旗下的金融机构为其雄心勃勃的扩张计划筹集资金。不过，德隆的管理人士否认了上述指责。
德隆董事局执行主席向宏昨日在接受采访时表示，德隆的问题反映出中国资本市场不够完善，因此民营企业难以通过常规的渠道筹集到资金。他表示，作为重组计划的一部分，德隆已和10家大型外国公司和2家国营企业达成了初步协议，由他们收购德隆60%的股份。
向宏称，德隆正在和政府部门讨论重组事宜，如果得到批准，该公司最早可于下周正式宣布重组计划。但他拒绝透露潜在投资者的身份以及其他细节。
行业分析师和企业管理人士均表示，德隆目前的窘境为投资者提供了一些逢低买盘的机会。长城证券的分析师张勇警告说，德隆系的崩溃已对市场信心产生了长期影响，他建议人们不要投资那些被德隆控股或与其有密切关系的公司。在诸多德隆系的股票当中，新疆屯河投资股份有限公司(Xinjiang Tunhe Investment)的A股昨日涨3.7%，至人民币3.65元（合44美分），但该股过去3个月来累计下跌了约70%；渖阳合金投资股份有限公司(Shenyang Hejin Holding Investment)涨8.1%，至人民币5.33元。
但张勇也认为，即使是稳健型投资者，也可以买进一些和德隆关系不怎么密切、因受到牵连而股价大幅下挫的股票。例如，上海茉织华股份有限公司(Shanghai Matsuoka Co. Ltd., 600555)和上海工业缝纫机股份有限公司(Shanghai Industrial Sewing Machine, 600843)就属于此范畴。这两家公司股价下跌是因为有媒体报导称它们因和德隆有关联而蒙受了损失。张勇说，这点损失对于这些大型企业来说不算什么。市场的过度担心导致它们的股价下挫，这两只股票都有可能出现反弹。
德隆为了偿还债务正在清理一些资产，这吸引了一些买家的兴趣。向宏不愿透露德隆的负债总额，但他表示该公司的债务与股东权益比率不超过60%。德隆为近期的扩张筹得的大部分资金主要来自以国内企业为主的1,000多家公司。德隆向这些投资者支付的利息高出银行利息。一位驻北京的直接投资公司管理人士表示，眼下不宜买入德隆系的股票，但适合买进德隆的资产。该人士表示他对德隆的汽车零部件、番茄加工、草坪器械等优质核心资产感兴趣。
不过，德隆的困境进一步揭示出中国金融领域存在著的问题。尽管有关德隆财务操作的更多细节目前仍不得而知，但许多行业分析师认为唐氏兄弟犯下了盲目发展的低级错误。高盛(Goldman Sachs)的分析师胡祖六(Fred Hu)表示，德隆是企业过度扩张的典型案例。他认为，德隆一味求大、涉足众多行业领域的做法属于典型的盲目发展。
德隆系的轰然倒下还使得人们对那些在德隆发展过程中曾助其一臂之力的中国银行业和企业投资者的风险管理提出质疑。有几次，德隆把旗下上市公司的股份作为抵押物向银行申请到了贷款。对于用股票作抵押申请贷款，西方的银行在评估股票价值时通常较为谨慎，为了抵消风险，它们为此类贷款规定的利率水平也会很高。尽管中国正在推动其坏帐缠身的银行业加强风险管理机制，但那些向德隆提供资金的国内银行显然并没有采取这类谨慎措施。
德隆出现的问题可能具有一定的普遍性。尽管中国政府近来推出了提高民营企业地位的政策，但大多数民营企业仍然难以获得银行贷款，这迫使它们不得不使用一些非常规手段来筹集资金。香港中文大学(Chinese University of Hong Kong)教授郎咸平在近期的一篇文章中告诫说，中国监管部门应该对德隆这类集工商业和金融业于一身的大型企业集团加以注意。
例如，在德隆系问题曝光之后，上海复星高科技（集团）有限公司旗下上市公司的股票也纷纷下挫，直到上周才有所反弹。复星的一位高层管理人士表示，该公司绝不会成为下一个德隆，不过，他承认由于中央政府紧缩信贷，该公司比以往更难获得银行贷款了。但他表示，在目前的宏观调控政策影响下，难以获得贷款是所有的民营企业都会遇到的问题。
