Chinese stocks fall after probes of brokers launched

Staff Writer
Columbus CEO

BEIJING (AP) — Two major Chinese brokerages announced they are under investigation in the latest aftershock of this summer's market plunge, sending share prices sharply lower Friday.

The Shanghai Composite Index was down 6.1 percent by midafternoon. Declines were led by Citic Securities Ltd. and Guosen Securities Ltd., which fell by the 10 percent daily limit after both said that they were under investigation for possible violation of securities market rules. Neither gave details of their possible offenses.

A string of Chinese securities executives have been detained or questioned following a plunge in share prices that began in early June. The announcements by CITIC and Guosen on Thursday were the first that brokerages themselves were being investigated.

The investigations were seen by many as an attempt by the ruling Communist Party to deflect blame for the 30 percent fall by the Shanghai index after state media encouraged the public to buy stocks.

In September, the police ministry announced executives of Citic, including its general manager, Cheng Boming, were suspected of insider trading and leaking sensitive information.

In August, 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.

News reports said another brokerage, Haitong Securities Ltd., also was under investigation but there was no immediate confirmation by the company or regulators. Trading in Haitong's shares was suspended Friday morning.

The market benchmark soared more than 150 percent beginning late last year before hitting a peak June 12 and plunging.

The downturn triggered complaints politically favored insiders profited at the expense of small investors. Beijing responded by barring large shareholders from selling and ordering executives to buy back any recently sold stock in their own companies.