Chinese stocks tumbled more than 5 percent yesterday in their biggest one-day loss in three months as a fresh regulatory crackdown and deteriorating profits triggered profit-taking after a recent rebound.
The blue-chip CSI300 index slumped 5.4 percent, to 3,556.99 points, while the Shanghai Composite Index plunged 5.48 percent to 3,436.30 and the Shenzhen Composite Index slumped 6.09 percent to 2,184.11, registering their biggest percentage loss since late August, the depth of a summer rout.
The flagship indexes also posted their worst weekly performance since August, losing more than 5 percent.
Market sentiment had already been fragile as investors braced for a fresh batch of initial public offerings that are to start next week and are cautious ahead of a possible US rate increases next month.
Moreover, investors were taken aback by news that the securities regulator had urged brokerages to cease financing clients’ stocks purchases through over-the-counter swap contracts, the government’s latest step to reduce leverage.
The China Securities Regulatory Commission (CSRC) also started investigations into China’s biggest brokerage Citic Securities Co (中信證券) and its smaller rival Guosen Securities Co (國信證券), while sources said that another major brokerage, Haitong Securities Co (海通證券), was also under probe.
Both CITIC and Guosen slumped 10 percent, the downward daily limit, while Haitong was suspended from trading.
“The deleverage move certainly has a negative impact on investor sentiment,” Shanghai-based Ivy Capital Ltd (常春藤資本) fund manager Shen Weizheng said. “In addition, it fuels concerns that more brokerages would be probed and more executives would fall.”
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 in August, which wiped trillions of US dollars off the country’s exchange boards.
In September, the police ministry announced executives of Citic, including its general manager, Cheng Boming (程博明), were suspected of insider trading and leaking sensitive information.
In August, Xinhua news agency said eight Citic employees and one current and one former employee of the market regulator were suspected of illegal stock trading.
Phillip Securities Group (輝立證券) analyst Chen Xingyu (陳星宇) said the regulator’s investigation of the top brokers has triggered a broader sell-off.
“CSRC’s investigation suggests the firms could be in some serious trouble,” Chen said, adding that it was “totally different from the routs in July and August.”
Additional reporting by AFP
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