Financial regulation

China detains Huarong’s celebrated bond trader for probes as scrutiny tightens on industry

Zhong Quan, head of bond investment at Huarong Securities, is under police investigations for personal matters, his firm said.

PUBLISHED : Wednesday, 10 January, 2018, 7:46am
UPDATED : Wednesday, 10 January, 2018, 11:06am

Zhong Quan, the top bond trader at Huarong Securities and the recipient of national honours for his work, had been detained by police for investigations, his employer said in a statement, as China tightens up scrutiny of it US$10 trillion market for fixed-income financial products.

Zhong, whose last job title was general manager of Huarong’s bond investments business, had been one of the most celebrated traders in China’s nascent bond industry, described on Huarong’s official website as having returned over 40 per cent every year to investors on their transactions since he joined in 2014. He has brought 1 billion yuan (US$153 million) of income to Huarong, the company said.

In 2016, he was awarded the May 1 Labour Medal, one of the country’s highest decorations for achievement at work, by the official All-China Federation of Trade Unions.

A source at Huarong Securities said Zhong had not been in the office for several months and had been busy borrowing money from financial institutions to handle a wave of early redemption demands from clients triggered by tighter government regulations on the bond market.

Huarong had been heavily involved in the business of entrusted bonds, whereby it would buy bonds from a client on the understanding the client would buy them back later. It was not known if Zhong’s reported detention was connected to this business, which has been the subject of a regulatory crackdown.

The police had investigated Zhong for “personal matters,” Huarong said in an emailed statement on Jan 9, without providing more details. The firm is operating normally, and the fixed-income investments team is stable and unaffected by the incident, Huarong said.

China cracks down on under-the-table bond deals in latest attempt to reduce risk in markets

Zhong’s clients include the state-owned China Development Bank, Industrial & Commercial Bank of China, and China Life Insurance, Huarong’s website shows.

China’s asset management industry has been going through an overhaul since late 2016 after authorities started to push for financial deleveraging by setting tighter rules on bonds.

Benchmark 10-year treasury yields climbed 87 basis points in 2017, the most since 2013, as the deleveraging campaign picked up speed.

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