China Markets Fall On News Of Brokerage Investigations

China Stocks Securities Investigation

Chinese officials are stepping up their efforts to rein in the country’s biggest brokerage firms, following a tumultuous summer and fall of trading. And that’s pushing share prices down this week.

Three of those firms – Citic Securities Co., Guosen Securities Co., and Haitong Securities Co. – all confirmed late this week that China’s regulators are investigating them for insider trading and other violations.

The CSI300 index of blue-chip stocks was down 5.4 percent while the Shanghai Composite was down 5.5 percent in Friday afternoon trading. Those dips are the lowest since Chinese shares cratered this past summer.

As we reported earlier, several Chinese executives have gone missing since those swings roiled world markets and raised questions about China’s stalling economy.

Analyst Gu Yongtao, with Cinda Securities, told Reuters that it’s likely “the purpose of the probes is to bring all businesses related to stock financing to the table so that regulators can have a clear picture of the leverage situation.”

Bloomberg also reports that officials made several surprise inspections of Chinese securities firms this month, and quoted Beijing Institute of Technology economics professor Hu Xingdou as saying that “this is still only the beginning” of what appears to be the government’s first major oversight effort on the industry.

Markets in China might get a boost on Monday if the International Monetary Fund decides, as expected, to include the country’s yuan in a basket of reserve currencies. Beijing has long pressed for the move, one which could go a long way to settle nervous investors.