Imagine for a moment the sentiment shock for mainstream Americans if Goldman Sachs’ Lloyd Blankfein was probed for insider-trading and publicly scapegoated for causing a nation’s equity market (and economy) to collapse. While it may be true, it would never happen in America… But in China, as part of what authorities call “purifying the markets,” the president of China’s biggest brokerage has been swept up in a widening campaign to root out financial wrongdoing and assign blame for the nation’s $5 trillion stock rout. As Bloomberg notes, shares are falling further in today’s markets as the probe of Citic Securities President Cheng Boming comes after the state-run Xinhua News Agency reported last month that four executives at Citic had admitted to so-called insider trading.
Since the market crash, China’s targets have ranged from so-called “malicious” short sellers to a journalist from business magazine Caijing whose report was alleged to have caused market panic. Authorities say they want to “purify” the market.
“There does seem to be a bit of a witch hunt for a scapegoat at the moment, but I think this is mostly signaling by the authorities that they will not tolerate what they perceive as ‘unhelpful’ selling in the market,” Tony Hann, a London-based money manager at Blackfriars Asset Management, which oversees about $350 million, said in an e-mail.
Citic confirmed the police investigation of Cheng in a statement to Shanghai’s stock exchange. A brokerage spokeswoman declined to comment further.