The president of China’s biggest brokerage is under investigation
The president of China’s largest brokerage has been caught in Beijing’s widening probe of insider trading.
Cheng Boming, the president of Citic Securities, is being investigated for “insider dealing and leaking inside information,” the company said in a stock exchange filing.
In addition to Cheng, two other top executives are being investigated by public security officials, Citic said.
Citic Group is among the most prestigious and respected Chinese financial firms. It was established in 1979, with the support of Chinese leader Deng Xiaoping, who opened the country’s economy to the world.
The widening investigation is bound to send a chill through China’s brokerages, which have been under intense scrutiny as Beijing tries desperately to reverse a stock crash that has wiped trillions of dollars off the nation’s markets.
The first signs of trouble came in June when the Shanghai Composite peaked at more than 5,100 points, a gain of roughly 150% over the previous 12 months. But then the bubble burst and the index lost 32% of its value in just 18 trading sessions.
Beijing reacted forcefully. The People’s Bank of China cut interest rates for the fifth time in nine months, regulators suspended new share listings, and threatened to throw short sellers in jail.
The China Securities Regulatory Commission, which polices the country’s markets, organized the purchase of shares using cash supplied by the central bank. Much of the actual buying has been carried out by China’s so-called “National Team,” a group of state-backed investors, brokerages and funds.
Despite costing as much as $236 billion, the measures have failed to stop the slide, and the benchmark Shanghai index is now more than 40% below its June peak.
China’s Ministry of Public Security did not immediately respond to a fax requesting comment on Wednesday. Stocks in Shanghai were trading roughly 1% higher.
Source: CNNmoney
Citic Securities Placed on S&P Credit Watch List After Probe
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S&P places firm on credit watch with negative implications
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Citic said Tuesday three staff members under investigation
The rating firm currently rates the brokerage and its Citic Securities International Co. unit at BBB+/A-2 and cnA+/cnA-1, S&P said in a statement Thursday, as it placed the two on credit watch with negative implications. It said it doesn’t expect any rating impact to be more than one level.
Citic Securities said Tuesday its President Cheng Boming and two other staff members were under investigation for suspected insider trading. The probes came amid a widening campaign in China to root out financial wrongdoing and assign blame for the nation’s $5 trillion stock rout.
“The widened police probe may pose significant challenges for Citic Securities’ business operations over the longer run,” S&P said. “The impact could be acute if Citic Securities is found to be partially responsible for any wrongdoings by its senior managers, and therefore subject to regulatory sanctions.”
State media reported earlier that Citic Securities executives including managing directors Xu Gang and Liu Wei had already confessed to insider trading.
Citic Securities shares closed 1.8 percent higher in Hong Kong on Thursday, its first advance in four days. The stock has slumped 47 percent in the past three months, compared with the benchmark Hang Seng Index’s 18 percent drop.
The brokerage is part of Citic Group, the nation’s first state-owned investment corporation, which was set up in 1979 as part of paramount leader Deng Xiaoping’s push to modernize the country.
Source: Bloomberg
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