China´s largest brokerage Citic is under investigation for causing the recent downfall in China´s stock markets. But they did just want the government initially wanted by cheering up the markets, says finance professor Paul Gillis to Bloomberg. The same government now needs a scapegoat.
Citic Securities is one of the brokerages whose margin lending fueled a spectacular stock market rally earlier this year that the state-controlled media cheered on. By singling out Citic Securities, said Paul Gillis, a finance professor at Peking University, the government has found a way to deflect public anger over the stock market collapse.
“In the past there has been little evidence of enforcement against market malfeasance and this sudden clampdown is just a knee-jerk reaction to a political crisis,” says Gillis. “Regulators are looking for someone to blame for the meltdown though insider trading is not what caused the market bubble.”
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