Angry investors give Chinese metals exchange head taste of market forces

Chinese investors are getting pissed off and this should be a wake up call to the government regulators.

Over the weekend, angry Chinese investors tackled and captured the head of a minor Chinese metals exchange, before turning him into the Shanghai police, reported the Financial Times.

Investors grab Fanya founder Shan Jiuliang

Investors grab Fanya founder Shan Jiuliang

The Fanya Metal Exchange, based in the southwestern city of Kunming, trades minor metals such as indium and bismuth. It also offers high interest, highly-liquid investment products. In addition to trading metals, Fanya “also functioned as a shadow banking conduit — not only leveraging metal deposited with the exchange as collateral for loans, but offering high interest investment products to retail investors,” according to Zero Hedge.

One of the characteristics of the products was supposed to be liquid. Well, in the spring, Fanya ran into some liquidity problems. Then in July, it not only ceased making payments on the products, but also froze all the funds, so investors can’t cash out.

Investors had been protesting to get their money back. But when that didn’t help, they flew to Shanghai from around the country to confront Fanya founder Shan Jiuliang.

In a dawn raid Saturday morning, they staked out Shan’s hotel, waited until he checked out, captured him, then threw him to the floor, before putting him in a car and taking him to the local police station.

The police took Shan into custody, but released him without charges, reported the FT. Among other businesses he heads are the Hong Kong-listed animation studio Imagi International Holdings, said the FT.

The implication here is that the Chinese people are not going to sit back and watch their investments disappear. Zero Hedge said, “we contend that any move by China to allow for defaults and permit market forces to play a larger role in determining which investments eventually sour is likely to be met with a severe public backlash, especially for something like WMPs where investors believe they may have been deceived.”



Categories: Asia Unhedged

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