Where is Ben Bernanke when you really need him?
Chinese regulators have suspended a trading account related to Citadel Securities, owner of hedge fund Citadel, as China takes further steps to rein in speculators in an effort to bolster flagging stock markets.
The government of China has declared war on “malicious” short selling, and has launched a campaign to support the two main stock markets which have dropped by over 30% in the last month and a half.
At this year's annual Robin Hood conference, which was held virtually, the founder of the world's largest hedge fund, Ray Dalio, talked about asset bubbles and how investors could detect as well as deal with bubbles in the marketplace. Q1 2021 hedge fund letters, conferences and more Dalio believes that by studying past market cycles Read More
Both main Chinese stock markets (Shanghai .SSEC and Shenzhen .SZSC markets) were down once again on Monday after the release of more economic data suggesting a slowdown in China.
The statement released late Friday by Citadel did not specify why its Shenzhen-based trading account had been frozen, but a knowledgeable source told the financial media that the China Securities Regulatory Commission was investigating the account for creating unnecessary market volatility, specifically the very large number of cancelled transactions.
More on China stock markets
Chinese factory activity was down more than expected in July, contracting the most in 24 months as new orders fell, according to a private survey published on Monday.
A weakening economy exacerbates the problems the government of China is facing in restoring investor confidence in stock markets even given a large state-directed buying campaign over the last several weeks.
Regulators in Beijing turned their focus to automated trading strategies last week, saying that had strong evidence some hedge funds had deliberately or accidentally distorted pricing in various issues in their search for quick profits.
The CSRC announced on Friday it had initiated an investigation into automated trading and has frozen activity in 24 stock accounts suspected of unduly influencing stock prices. Although the regulator didn’t name any of the owners of the restricted stock accounts, Citadel admitted over the weekend that one of their accounts was among those closed.
On its website, the CSRC noted it is investigating over 50 suspected securities violations and false promises to sell down share holdings during the recent Chinese stock markets crashes.
Statement from Citadel
“We can confirm that while one account managed by Guosen Futures Ltd.–Citadel (Shanghai) Trading Ltd.–has had its trading on the Shenzhen Exchange suspended, we continue to otherwise operate normally from our offices, and we continue to comply with all local laws and regulations,” a Citadel spokesman noted in a statement on Sunday..