Shares of CITIC Securities Co (中信證券), China’s biggest brokerage, yesterday fell after the company said some senior managers are under police investigation as part of a probe by Beijing into possible market manipulation linked to the slump in its stock markets.
Authorities are looking at whether market malpractices contributed to the plunge in Chinese equities, which have fallen about 40 percent since mid-June.
CITIC late on Tuesday said that three company officials, including general manager Cheng Boming (程博明), are being investigated for alleged insider trading and leaking information.
Photo: Reuters
Cheng is one of the most senior financial executives known to have been embroiled in Beijing’s market manipulation probes so far. He forms part of the seven-member executive committee overseeing China’s flagship investment bank, which has a dominant position in the country’s equity markets.
The brokerage has formed a core part of the so-called “national team,” a collection of state-linked banks, brokers and funds called on by Beijing to buy up shares and help stabilize equity markets following the sell-off.
However, it has also been caught up in the market manipulation probes. State media have previously reported that four senior CITIC executives confessed to insider dealing last month.
Apart from confirming that Cheng and two other officials were being investigated, CITIC has declined to comment.
CITIC has spent the past three years trying to boost its overseas presence and expand into asset management and complex derivatives. In 2012, it paid US$1.3 billion for the Asia-focused brokerage CLSA and has also established brokerage units in several foreign markets, including the US.
The brokerage booked a net profit of 11.3 billion yuan (US$1.77 billion) last year on revenue of 39.5 billion yuan.
CITIC’s Hong Kong-listed shares dropped more than 4 percent in early trading yesterday, although they recovered some of those losses to be down 1.4 percent. Its Shanghai-listed shares were down 1 percent.
The probe did not weigh heavily on the broader Chinese stock markets, which steadied after losing 6 percent on Monday and Tuesday. The benchmark Shanghai Composite Index surged 4.89 percent to 3,152.26, while the Shenzhen Composite Index jumped 6.52 percent to 1,683.36. Hong Kong shares also rallied, piling on 2.38 percent to 21,966.66.
However, trading volume remained light, with many investors stayings on the sidelines amid concern over China’s slowing economy.
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