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We Disappeared Some Folks: Details Emerge In China's Sweeping Probe Of Stock Market Rescue
It was exactly one week ago today when we reported that Guo Guangchang, a self-styled Chinese Warren Buffett worth some $7 billion, had disappeared.
For those who follow developments in China’s capital markets, it was obvious what had happened. Guo was swept up in Xi’s campaign to root out misconduct tied to the country’s equity market meltdown and subsequent government-engineered rescue effort.
Dubbed “kill the chicken to scare the monkey,” the witch hunt has ensnared a number of high profile government officials and bankers tied to Beijing’s plunge protection “national” team, which poured in excess of CNY1.5 trillion into Chinese stocks in Q3 in a desperate attempt to push back against an epic unwind in the half dozen backdoor margin lending channels that helped push stocks to nosebleed valuations earlier this year.
Guo’s detention (he was allegedly met by authorities when he arrived in Shanghai on a flight from Hong Kong) sent shockwaves through Chinese markets. “His disappearance will fuel anxieties in the private sector that the anti-corruption crackdown launched by President Xi Jinping three years ago is being extended to high-profile entrepreneurs,” FT noted last week.
Guo has since resurfaced, but the crackdown - which, you’re reminded, is led by Fu Zhenghua, a former Beijing police chief responsible for orchestrating an infamous prostitution bust, a campaign against "popular bloggers whose sometimes anti-establishment comments drew the ire of party leaders," and a decree prohibiting police officers from drinking alcohol outside of their homes - continues unabated. On Thursday, we get still more details about Beijing’s comical crusade courtesy of WSJ who notes that the focus of the probe has shifted squarely to members of the national team.
“Communist Party graft busters have been taking officials, one by one, to a hotel close to the [CSRC’s] headquarters to press them to come clean or report on others,” The Journal says, adding that “the investigators also have set up shop on the top floor of the agency’s 22-story headquarters in downtown Beijing, banned agency officials from leaving China and set up a hotline and red mailbox in the lobby for anonymous tips.”
We're also now beginning to understand the connection between Guotai Junan Chairman and CEO Yim Fung, Citic executives Jun Chen, Jianlin Yan, Xu Gang, hedge fund manager Xu Xiang, and CSRC vice chairman Yao Gang. Here's more from The Journal:
Authorities have arrested or put under corruption probes major figures including executives at well-connected brokerage Citic Securities Co. and a highflying hedge-fund boss suspected of insider trading.
The CSRC has grown in importance as China’s leadership seeks to turn the nation’s underdeveloped capital markets into a viable corporate funding source.
The top official accused so far is Yao Gang, 53 years old, until recently its vice chairman and a rising star within the party.
On Nov. 13, the commission said Mr. Yao was taken away for “suspected serious violation of party discipline.” The officials with knowledge of the matter say investigators are probing whether Mr. Yao leaked classified information about the government’s market rescue to executives at brokerages including Citic Securities and Guotai Junan Securities Co. so they could buy stocks before they were purchased by state funds.
“The focus of the investigation is on him potentially having enabled those big brokerage executives to make a killing at the expense of the nation’s interest,” one of the officials said. “Another question is whether he received any personal gains in return.”
Apparently, Yim Fung has known Yao Gang for at least 15 years. Both worked at Guotai, and “they’ve been friends since then." Beijing is also probing CFS, the state-sponsored margin lender under CSRC's control.
At this point, it's not entirely clear what Xi is trying accomplish. We already know selling and especially short selling can "get you buried real quick" (to quote Black Mass) in China, and it now appears front running (in this case buying ahead of the plunge protection team) is a one way ticket to a Politburo prison as well.
With 15% of the market still halted, and with further yuan turbulence dead ahead, China may want to consider whether abducting executives and hauling them off to clandestine interrogation sessions in hotel rooms is the right approach when it comes to promoting the liberalization of capital markets and projecting the "right" image to the rest of the world on the eve of the yuan's SDR inclusion.
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I don't know what's worse - In the US Buffet is given a medal of honor. In China people aren't allowed to participate in the market. The US doesn't prosecute, but China detains without prudence.
This goes to show how corrupt the financial system is as a whole. Go against the system they will get you, go with the system, no matter the criminality, they will reward you.
"...abducting executives and hauling them off to clandestine interrogation sessions in hotel rooms"
Yes, more of this.
Until it's for being a dumbass statist and then you get disappeared
It's all fun and games until some one threatens to shove a hot soldering iron up your ass.
Bring some of that Chinese justice to Wall Street.
Start with Lloyd, Jamie, Blythe, and then work your way down through the ranks.
Then, try on all of the FED, past, and present board members.
The Honorable Corzine would not last a week in China. Ditto for Angelo "Orange Face" Mozillo.
Hillary ! ? ! ? ! ?
Can we give them Corzine? How about Mozillo? Or Geithner?
Don't forget Hank, Rummy and Dick "Shoot em' in the face" Cheney.
There's nothing worse or more contemptible than a politician who refuses to stay bought.
Lucrative contract opportunity available.
Where do you get these ideas??? In China there are banks and investment companies everywhere. People hand out flyers at malls advertising security companies and higher rates of interest? At least 10% of the population is very actively involved in trading stocks.
It is easier to start and run a company in China than America. It is also easier to get rich.
Your statement is strange. Have you ever been to the country?????
They are both equally bad.
I've grow to think there is simply no way to correctly run any kind of stock (or option/future) exchange. In the end they always turn out to be casinos which carefully hide who the house is, it's been that way since nearly the beginning. Much like fractional reserve banking I think they were simply a mistake. They shouldn't be allowed, period.
All you fire monkeys are belong to us.
"No sehrl, onry buy!"
I haven't heard of any Chinese banking big shots jumping out of those hotel windows or dying from nail gun wounds. Which system has more tolerance? Your call.
How the fuck would I know? I have never been to China.
I want to think it is a hoax. These guys are escaping and staging their false arrests as a distraction. How many billion people in China?? How the fuck would anybody know???
http://www.barstoolsports.com/boston/dude-gets-destroyed-with-an-a-knock...
Hmmm, didn't Hank Paulsen essentially do the same for Blankfein?
That whining sound is a thousand Biz jets warming up their engines,ETA California....
Looks like someone has finally got the right idea.
Keep up the good work!!!
Can we get the Chinese to disappear the Congress?
Dont forget Blankfein, Dimon and Blythe
This is the way to deal with evil capitalists
I am sure some of these guys deserve exactly what they are getting, and fraud certainly deserves to be punished, but there is a fine line that should never be crossed. Scapegoating of the short sellers is a dangerous game, and ultimately this type of heavy handed behavior can be short sighted. It could make the problem worse by causing capital to flee. Central planners always get it wrong when they try to set prices. It never works, but when they have that kind of power, they will always try. They just can't help themselves. Who could resist the temptation to put their own view of what the market should be doing into action? Never mind that short sellers can actually be healthy for a market because these are the only guys buying in a crash, no way, put them in jail. While it may seem counterintuitive, markets actually work best when participants can act freely in their own self interests.
"Never mind that short sellers can actually be healthy for a market because (apart from state owned enterprises and the central bank) these are the only guys buying in a crash..."
Fixed.
Take your logic and commons sense and leave this place good sir! We shall have none of that!
Chicoms and Norkos and Obama's SS Corps (ISIS) .... are normally so open .... about their executions .... are Chicoms ashamed of their brutish behaviour .... it's a start in the civilization process ?
Watching the Chinese .... it occurs to me .... the Japanese were right .... you treat animals .... like animals ?
Putin is backing Trump .... without further comment .... barenakedislam.com ?
Yeah, China and its currency are surely going to replace the USA and USD any minute, they are SO SO SO ready to be the world monetary, economic, financial and military leader.
I have to lock my office door and turn off the phone to block all the institutional and high-net worth investment clients who are demanding that I move their money from the boring USA to the much more exciting China.
[I had to take tranquilizers to stop laughing long enough to write this]