Shanghai Stocks Dive 5.5%

Citic and rival Guosen Securities, also being investigated, fell 10% each, the maximum one-day drop allowed.

By Faisal Ahmed China’s stocks tumbled the most since the depths of a $5-trillion plunge in August as some of the nation’s largest brokerages disclosed regulatory probes, industrial profits fell and two more companies said they’re struggling to repay bonds.

The previous month, the official Xinhua News Agency said eight Citic employees and one current and one former employee of the market regulator were suspected of illegal stock trading.

Chinese stock market crash that unsettled nerves across globe is back haunting traders and investors as market plunge highest since June-August crash. Guosen and Haitong are among the country’s 10 biggest securities firms.

The Securities Association of China said earlier this week that Citic Securities had overstated certain financial transactions between April and September, the Journal reported.

“With regards to China, our sense is that there are still significant risks to the global economy but on the other side, that they’ve got the policy ammunition to dampen that risk”, said Chris Green, director of economics and strategy in Auckland at First NZ Capital Group Ltd.

The Shanghai Composite Index sank 5.5 per cent, with a gauge of volatility surging from the lowest level since March.

Dong Dengxin, a securities researcher with the Wuhan University of Science and Technology, said: “The regulator’s move is a positive step for the Chinese stock market which has been dogged by excessive administrative control and intervention, which has led to rampant rent-seeking and corruption”.

The brokerages are suspected of violation of securities rules that contributed to the 30 percent fall by the Shanghai Composite Index during the summer. Hong Kong’s Hang Seng dropped 1.9 percent to 22,068.32.

Shares of Haitong Securities (600837.SH) fell 3.8% in Hong Kong, before the brokerage issued a trading halt after the market opened without citing reasons.

CITIC Securities’ Shanghai-listed shares closed down 0.69 per cent yesterday, while the CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 0.74 per cent.

ENERGY: Benchmark U.S. crude was down 76 cents at $42.28 a barrel in electronic trading on the New York Mercantile Exchange, while Brent crude, a benchmark for worldwide oils, lost 7 cents to trade at $45.38 a barrel in London. S&P 500 futures dipped 0.1% to 2,085.40.