Three top Chinese brokerages under investigation

Haitong Securities, China’s second biggest brokerage by assets, and eighth-ranked Guosen Securities — whose president hanged himself weeks ago — both confirmed that they were being probed by the market regulator China Securities Regulatory Commission (CSRC).

Neither gave details of the investigation.

Their announcements came shortly after the country’s largest broker, Citic Securities, said late Thursday it was the subject of an inquiry. Several of its executives have previously been put under investigation for insider trading, the official Xinhua news agency reported.

The investigations are the latest step in a national crackdown on price manipulation, short selling and insider trading in the financial sector following a stock rout that wiped trillions of dollars off the country’s market capitalisations.

After soaring 150 percent in one year in a debt-fuelled bubble, the Shanghai and Shenzhen bourses went into a tailspin in June that extended into August, tumbling nearly 40 percent despite massive intervention by the authorities.

Officials have since taken unprecedented efforts to stem the market rout, including investigating short-selling and banning big shareholders from selling, that saw Shanghai rise by almost a quarter from its lows.

But the new investigations saw Chinese exchanges move sharply lower on Friday, with the benchmark Shanghai Composite Index closing down 5.48 percent and the country’s second market Shenzhen slumping 6.09 percent.

“The biggest reason for such a sudden drop today is because of regulators’ investigations of the top brokers,” Phillip Securities analyst Chen Xingyu told AFP.

“It has triggered a broader sell-off. CSRC’s investigation suggests the firms could be in some serious trouble.”

In a statement to the Shanghai exchange, Haitong said it “will actively assist the investigation and release any progress in a timely manner”, adding it was “operating normally”.

Guosen’s president Chen Hongqiao hanged himself last month after authorities prevented him from leaving the country.

Shanghai-listed Citic Securities slumped by its 10 percent daily limit and Shenzhen-listed Guosen Securities also tumbled 10 percent. Haitong Securities halted trading in its shares in Hong Kong and Shanghai in the morning, before confirming the investigation.