Hong Kong quoted Bank of East Asia (BEA) has been battling "rumour mongering" which is "unfounded". So says the company, the Hong Kong Exchanges and Clearing and the Hong Kong Monetary Authority.

Text messages spread far and wide of the supposed liquidity problems facing BEA which resulted yesterday in large queues of "foolish and naive retail customers" seeking to withdraw their savings. Overnight many of these lines had dissipated on the coordinated denials of regulators and the bank itself.

BEA Chair David Li, his directors and the local equivalent of Warren Buffet Li Ka-Shing (for whom a better surname couldn't have been invented in the circumstances) have even gone in and bought shares in a show of confidence. Nobody knows how much was laid out in this show of confidence ("substantial" amounts according to "sources"). But they have bought some unspecified quantity of the bank's equity.

NakedShorts has noted the tendency of "malicious rumours" like those in this story (but, let's be clear, not necessarily those of this story) to be viewed retrospectively as "early facts". Lack of interbank liquidity is ultimately the cause of these scares; and the irony is that a centrally planned system (or maybe hybrid is more accurate) is depending on a democratic Congress to sort it all out.

Related links:
'Malicious rumours' spark run on Bank of East Asia

Bank of East Asia hit by trading loss

UPDATE 1-Tycoons prop up Bank of East Asia, shares rally

Asia Money Rates Rise as Bailout Doubt Chokes Lending (Update1)
Bank of East Asia defends liquidity

HK central bank injects funds amid tight credit
Hong Kong authorities move to quell rumors over bank's stability

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