Main Chinese language wealth supervisor tied up in prison detention case

An investor watches the electronic board at a stock exchange hall in Hangzhou, China.

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U.S.-listed wealth management company Noah Holdings is the latest Chinese firm to have its shares knocked by the disclosure of ties to a criminal detention.

Chinese authorities have made local headlines in the last week with reports of investigations and detentions that have sent shares of connected companies plunging. It’s a sign of how much control a single person can still often have over a stock in the murky Chinese business world, and how the government is trying to take a tougher approach.

Noah Holdings announced late Monday Beijing time that an affiliate, Shanghai Gopher Asset Management, oversaw some credit funds with ties to a company whose controlling shareholder has been criminally detained by the Chinese police.

Although that connection may seem tenuous, Noah’s shares plunged 20.4% in New York trading Monday and fell another 2.1% in Tuesday’s session despite the company’s attempt to reassure investors. Gopher said in a Chinese-language statement translated by CNBC that the firm has already established a special emergency and handling team, and that its products are independently managed and operated.

Complicated connections

The credit funds in question had a total principal of about 3.4 billion yuan ($494 million), and were involved with financing related to Hong Kong-listed Camsing International, according to the release. Camsing did not immediately respond to an emailed request for comment.

Noah added in a separate statement that the funds are related to supply chain financing between Camsing and e-commerce giant Gopher has already filed a legal complaint against the two companies and is cooperating with the police, the Chinese statement said, according to a CNBC translation. The e-commerce company did not immediately respond to CNBC’s request for comment.

Camsing, an entertainment company that acquired Stan Lee’s POW! Entertainment, said in a filing dated Friday, July 5, that it had become aware that Lo Ching, the company’s chairperson and executive director, is being held in criminal custody by the Shanghai Public Security Bureau’s Yangpu Branch. When CNBC called the police station, a representative said only family members would be notified of the detention.

Shares of Camsing plunged 80.4% on Monday, and dropped another 26.7% Tuesday. The stock has a listed valuation of 711 million Hong Kong dollars ($91 million), according to Wind data.

Lo holds 64.87% of Camsing International’s issued shares, according to the company’s 2018-2019 interim report dated Feb. 27, 2019.

Lo is also the controlling shareholder and chairperson of Shanghai-listed Jiangsu Boxin Investing & Holdings, which Wind data shows has a market valuation of 3.4 billion yuan. The company said in a filing dated July 5 that Lo and CFO Jiang Shaoyang were detained on June 20 and June 25, respectively.

The Shanghai-listed stock fell by nearly the 10% limit on Friday, and initially extended those losses on Monday, before recovering. Shares were up nearly 10% Tuesday, trading around the same level as a week ago.

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