China Probes Citic Securities President for Insider Trading

SHANGHAI/HONG KONG Sept 16 (Reuters) – Shares in CITIC Securities, China’s biggest brokerage, fell on Wednesday 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.

Cheng (third from the right) with the rest of the executive committee. 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.

The authorities have been alarmed by the steep equities sell-off, which they suspect is linked to market manipulation but has also been triggered by global concerns over slowing growth in the world’s second-largest economy. Besides Cheng, Citic on Tuesday named two other staff members, including one person from the firm’s information technology centre, as being under investigation for suspected insider trading.

CITIC could not be reached for comment.

CITIC has spent the past three years trying to boost its overseas presence and expand into asset management and complex derivatives. China’s benchmark index of the biggest listed stocks in Shanghai and Shenzhen closed down almost 4% on Tuesday while the Shanghai Composite index dropped 3.55%. Its Shanghai-listed shares were down 1 percent.

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. Stocks in Shanghai were trading roughly 1% higher.

The swaps gave foreigners a way to sidestep quotas that limit their participation in China’s markets because the transactions were initiated in Hong Kong, it said.