Citic Securities Placed on S&P Credit Watch List After Probe

Updated on
  • S&P places firm on credit watch with negative implications
  • Citic said Tuesday three staff members under investigation

Standard & Poor’s placed China’s largest brokerage Citic Securities Co. on a credit watch list days after the firm said some employees including its president were being probed for alleged insider trading.

The rating firm currently rates the brokerage and its Citic Securities International Co. unit at BBB+/A-2 and cnA+/cnA-1, S&P said in a statement Thursday, as it placed the two on credit watch with negative implications. It said it doesn’t expect any rating impact to be more than one level.

Citic Securities said Tuesday its President Cheng Boming and two other staff members were under investigation for suspected insider trading. The probes came amid a widening campaign in China to root out financial wrongdoing and assign blame for the nation’s $5 trillion stock rout.

“The widened police probe may pose significant challenges for Citic Securities’ business operations over the longer run,” S&P said. “The impact could be acute if Citic Securities is found to be partially responsible for any wrongdoings by its senior managers, and therefore subject to regulatory sanctions.”

State media reported earlier that Citic Securities executives including managing directors Xu Gang and Liu Wei had already confessed to insider trading.

Citic Securities shares closed 1.8 percent higher in Hong Kong on Thursday, its first advance in four days. The stock has slumped 47 percent in the past three months, compared with the benchmark Hang Seng Index’s 18 percent drop.

The brokerage is part of Citic Group, the nation’s first state-owned investment corporation, which was set up in 1979 as part of paramount leader Deng Xiaoping’s push to modernize the country.