Chinese brokerages say they are under investigation

The China Securities Regulatory Commission (CSRC) is investigating Citic Securities for “allegedly violating the Supervision and Management Regulation for Securities Brokerages”, the company said in a statement filed to the Shanghai stock exchange, where it is listed.

Probes in the finance sector came as the CSRC tried to examine the country’s summer stock market rout during which the Shanghai gauge fell from as high as 5,178.19 in mid-June to as low as 2,850.71 in late August.

Chinese shares plunged yesterday in their biggest daily decline since this summer’s rout, dragging down other Asian stock markets, as a fresh regulatory crackdown on brokerages and falling industrial profits in the world’s second largest economy weighed on sentiment. “The removal of restrictions for large brokers to sell and the IPO resumptions may not have been announced at an opportune time”.

Quoting sources, Reuters said that China Haitong Securities is under investigation by the regulator of “alleged violations of security regulations”. Data released on Friday showed the country’s core consumer prices index (CPI) recorded its third straight month of falls – down 0.1% in October from a year earlier.

China’s stock market plunged on Friday after several brokerage firms said they were being investigated by regulators over securities violations. Hong Kong’s Hang Seng dropped 1.9 percent to 22,068.32. Trading in Haitong shares was suspended Friday morning.

Shanghai’s stock market slipped 1 percent, while Hong Kong suffered similar losses.

Japan’s Nikkei ended in the red, down 0.3 percent, after the government said prices fell last month, while consumer spending also dropped, overshadowing news that unemployment was at a two-decade low. Market confidence has picked up since, with the key Chinese indices trading at about 25% above their August lows.

The Securities Association of China said earlier this week that Citic Securities had overstated certain financial transactions between April and September, the Journal reported. Policy makers also armed one state agency with more than $480bn to prop up shares. USA equity markets reopen Friday after Thursday’s Thanksgiving holiday for a shortened trading day.

“After the stock market bubble burst, they just continue to clamp down on markets, pull away rights to trade, create an environment where people are afraid to trade even though they have done nothing wrong”, said China expert and “Red Capitalism” author Fraser Howie.