Missing Chinese trader has market abuzz
SHANGHAI— A copper trader for a secretive, high-level Chinese government agency has gone missing. But more than his whereabouts, traders are seeking clues as to how his employer — and Beijing — will handle the potential fallout.
Liu Qibing, a senior trader working for an entity of China’s State Reserves Bureau, hasn’t been heard from in weeks, since rumours surfaced of a large short position held by his employer in London copper markets. The position, rumoured to be between 150,000 and 200,000 tonnes, was taken as a bet that copper would fall — just as the industrial metal continued to hit new peaks.
“ We all really just want to go up there and pay them a visit, to find out what is really going on,” said a Shanghai- based copper trader. The state bureau said Liu was “ on leave” and said any short position was undertaken on his behalf and not by the state, adding to the uncertainty over whether the agency is prepared to recognize any possible obligations.
Although the bureau is immune to public scrutiny — the level of its reserves, its purchases and sales are legally a state secret — it does answer to the State Council, or China’s cabinet, a stern higher authority.
Liu headed up the bureau’s physical and futures trading on the London Metal Exchange, traders have said. Rather atypically, the secretive bureau recently started to openly sell copper on the spot and futures markets, in a move traders view as trying to push down prices and help unwind the position. The last copper trader to hit headlines was Sumitomo Corp.’ s Yasuo Hamanaka, who racked up $ 2.6 billion ( U. S.) in losses. Nick Leeson ran up £ 791 million losses in trading Nikkei futures at Barings, the U. K.’ s oldest investment bank, and served jail time.
Beijing is concerned about the image of China Inc., as its statebacked companies increasingly list on international stock exchanges or hedge their foreign exchange and futures positions abroad, analysts with ties to China’s metals industry say. But cultural factors mitigate against risk- management procedures that could help limit spectacular losses. The hierarchical structure of Chinese firms prevent risk managers from having the authority to face down a trader with a gambling streak, analysts say. The severe punishment and loss of face for an individual responsible for a lossmaking position may also have the perverse effect of encouraging officials to take larger bets in the market, rather than closing out a position to limit losses, analysts say.