Reporter’s stock market ‘confession’ a stark warning to Chinese media

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.

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.

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. 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. Xinhua said Wang told investigators that his article was based on his personal assessment and information he had gleaned about the stock market, but he did not verify it. 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. 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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