Shanghai: Chinese shares closed down more than five per cent today, after inquiries were announced into several major brokerage firms. The benchmark Shanghai Composite Index tumbled 5.48 per cent, or 199.25 points, to 3,436.30. The Shenzhen Composite Index, which tracks stocks on China’s second exchange, slumped 6.09 per cent, or 141.58 points, to 2,184.11.
The plunges came after one of the country’s biggest brokerages, Guosen Securities, said it was being investigated by market regulators for suspected “rule violations”, weeks after its president hanged himself.
That came after the number one stockbroker, Citic Securities, said overnight that it was being probed, following inquiries into several of its executives for insider trading. Second-ranked Haitong Securities also halted trading of its shares in Shanghai and Hong Kong, “pending the release of an announcement which may constitute inside information”.
Phillip Securities analyst Chen Xingyu told AFP: “The biggest reason for such a sudden drop today is because of regulator’s investigation of the top brokers. It has triggered a broader sell-off. “CSRC’s investigation suggests the firms could be in some serious trouble,” he said, adding that it was “totally different from the routs in July and August”, when Chinese shares plunged as a debt-fuelled bubble burst.
After soaring 150 per cent in one year, the Shanghai and Shenzhen bourses went into a tailspin in June, tumbling nearly 40 per cent despite massive intervention by the authorities. The investigations are the latest in a national crackdown on price manipulation, short selling and insider trading in the financial sector following the stock rout, which wiped trillions of dollars off the country’s exchange boards.
