Hundreds arrested as Beijing launches stock market crackdown

31 Aug 2015 | Author: | No comments yet »

China Brokers Tumble as Citic Staff Detained, Rescue Costs Grow.

China’s brokerages tumbled after Citic Securities Co. executives were detained and people familiar with the matter said the industry was told to contribute another 100 billion yuan ($15.7 billion) to a market rescue fund.Chinese state media announced a slew of confessions on Monday following investigations into recent stock market gyrations, including from a detained reporter who admitted to spreading false information that caused “panic and disorder”.China has punished 197 people in a special campaign by police targeting online rumors about China’s stock market, the recent fatal explosions in Tianjin and “other key events”, Al Jazeera said quoting China’s state media reports.

The managing director of Citic Securities, Xu Gang, and three other of the brokerage’s senior officials have been detained for alleged inside trading, state-run Xinhua reported on Monday. The China Securities Regulatory Commission gave the order on rescue-fund contributions at a meeting with representatives of 50 brokerages on Saturday (Aug 29), which CSRC Chairman Xiao Gang also attended, said the people, who asked not to be identified because the meeting hasn’t been made public.

An official from China’s securities regulator had confessed to insider trading while four senior executives from China’s largest brokerage, CITIC Securities , had also confessed to insider dealing, the official Xinhua news agency reported. No details of the punishments were given, but according to the report, the crimes punished included claiming a man had jumped to his death in Beijing due to the stock market slump and falsifying the number of people who had died in the Tianjin blasts. China is trying to boost its stock markets, which have plunged some 40 percent since mid-June on concerns over the country’s slowing economy and an unexpected devaluation of the yuan currency in mid-August.

Swings in Chinese markets this month have rattled investors worldwide as they struggle to anticipate policy actions in the world’s second-largest economy. China revived its stock-market rescue program on Aug 27 after the government’s absence from the market earlier in the week contributed to the biggest two-day sell-off since 1996. Among a number of measures, authorities have cracked down on the fabrication of trading information, alleged malicious short selling and other strategies seen as hampering a recovery.

Also held were executive committee member Liu Wei; Fang Qingli, the head of the company’s securities financing business; and company director Chen Rongjie. Stocks rallied almost 10 percent over Thursday and Friday on speculation authorities are propping up markets before President Xi Jinping takes the stage at the parade, which the government will use to demonstrate its rising military and political might. “There is a lot of confusion about purchases of stocks by state-linked funds,” said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group Co. in Shanghai. “Disclosures are very limited so it is impossible to know what they are doing with certainty.” The Shanghai gauge declined for the first time in three days, losing 93 points to 3,139.10 at 1:02 p.m., taking its decline this month to 14 percent for a second month. In an article published on July 20 – soon after the government unleashed hundreds of billions of yuan to bail out the beleaguered market – Wang wrote that the CSRC was preparing an exit plan. After a $5 trillion stock rout, Chinese officials trying to stabilize the market are mixing state-mandated share purchases with a campaign highlighting government efforts to crack down on alleged manipulation.

In a statement last Wednesday, a day after Xinhua said Wang was being held, Caijing said it had not been given a reason for his detention, adding it would support his actions within the normal course of reporting. Formal arrest in China normally comes after some time in police detention, when the case is handed to prosecutors, with trial and conviction almost guaranteed. Tags: Caijing magazine report, China crackdown on online rumormongers, China punishes 197 online rumormongers, Chinese journo says report created panic in stock market, Liu Shufan in insider trading, report in Caijing, seditious rumors about China’s war parade, Wang Xiaolu The CSRC employee detained was named as Liu Shufan, who was accused of taking bribes from a listed company in return for securing approvals from the regulator.

Chinese state media often publish confessions of those detained in high-profile cases before they are tried in court, a practice that rule of law advocates say violates the rights of the accused to due process. A statement released by Citic Securities on Sunday before the Xinhua report said several of its senior management members and employees were asked to assist in investigations, but added that the company’s operations remained stable.

Liu Shufan, a CSRC staff member, admitted making millions of yuan from insider trading in shares of two companies last year and also to forging documents in connection with an apartment purchase, Xinhua said. China Construction Bank Corp. lost 2.9 percent as the lender joined its domestic rivals in reporting zero profit growth in the first six months of the year. Puts that pay out on a 10 percent drop in the China 50 exchange-traded fund cost 9.3 points more on Monday than calls betting on a 10 percent gain, according to implied volatility data on one-month contracts.

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