Chinese wealth manager alleges 3.4 billion yuan fraud at Camsing

[SHANGHAI] Noah Holdings, one of China's largest wealth managers, levied accusations of fraud against Camsing International Holding, the Hong Kong-listed company that said last week its chairman had been detained by police.

The asset manager has filed a lawsuit and reported Camsing to regulators in relation to a 3.4 billion yuan (S$672 million) asset management product that's in danger of default, Wang Jingbo, Noah's chief executive officer and co-founder, said in an internal memo on Monday that was obtained by Bloomberg News.

The product's duration will be extended by as much as one year to ensure repayment, Mr Wang said in the memo, the contents of which were confirmed by a spokeswoman.

Camsing, a conglomerate with businesses spanning entertainment and health care, saw its stock plunge 80 per cent in Hong Kong on Monday after the company said its chairman Lo Ching was being held in criminal custody by the Shanghai police. Ms Lo is also the chairman and executive director of Singapore-listed Camsing Healthcare.

Noah's shares fell 20 per cent in New York after it said some credit funds managed by one of its affiliates provided "supply chain financing involving third-party companies related to Camsing".

A representative who answered the phone at Camsing's office in Hong Kong declined to comment. The stock was up 3.3 per cent at 10.15am local time on Tuesday.

Chinese investors have seen a slew of recent frauds involving listed companies, including false financial reporting by drugmaker Kangmei Pharmaceutical and fake profits at laminating-film maker Kangde Xin Composite Material Group. The incidents are adding to an already stressed credit market: Bonds from at least 56 Chinese companies totalling US$40 billion face repayment pressure, according to company and ratings firm statements compiled by Bloomberg.

The incident "could significantly hit investor confidence, especially given current high macro-economic uncertainty and low risk appetite among clients", Citigroup analysts led by Daphne Poon wrote in a note published on Tuesday.

The underlying assets of the product are backed by accounts payable from Beijing JD Century Trade Holdings to Camsing, Mr Wang said in the Noah memo.

In a statement on Tuesday, JD.com, JD Century Trade's parent, denied any involvement.

"Camsing falsified JD.com's business contracts, engaging in fraudulent behavior," a spokeswoman said by email. "We are shocked that this occurred and have been cooperating with the police on this issue."

Citi's analysts said that downward pressure on the economy could have contributed to the alleged fraud at Camsing. The company has worked with Noah for three years and previously had a good track-record, they said, with more than 6 billion yuan of asset management products having matured and been paid back.

Shanghai-based Noah has obtained additional shares of Camsing and its affiliates as collateral, and a Chinese court has frozen the company's stock and bank accounts, Mr Wang said in the memo, without providing more details.

BLOOMBERG