State news agency Xinhua said earlier that police would investigate clues pointing to potentially malicious short-selling amid a slide in the Chinese stock market which had plunged almost a third in the past month.
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Some members of the Chinese public have started to demand the resignation of Xiao Gang, the head of China’s securities regulator, and a Reuters search online on Thursday showed that some of these calls were censored by authorities. Vice Public Security Minister Meng Qingfeng visited the regulator’s offices in Beijing on Thursday.
The ruling Communist Party has announced an unprecedented series of measures to boost shares, including banning major shareholders, executives and directors from selling stakes, but the selloff has continued. “They will probably investigate a few accounts with big amounts of money and catch some as typical examples”.
“But since so many small caps are suspended from trading, the only way to reduce risk exposure is to sell blue chips”, said Du Changchun, analyst at Northeast Securities.
But the market sell-off has extended beyond the mainland, with Chinese stocks on USA exchanges falling as much as 6.1 percent on Tuesday, according to the Bank of New York Mellon index of such securities (.BKCN). The index pared losses after the announcement, trading 4 percent lower at 10:14 a.m. local time.
“It’s uncommon to see so many shares posting consecutive daily limit falls, and the index futures swinging so wildly”, said Wang Feng, CEO and founder of hedge fund firm Alpha Squared Capital Co and a ex- Wall Street trader.
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“The government feels compelled to send a clear message that on the one hand they are supporting the market and, on the other hand, they’re cracking down on any activities that could destabilize the market”, said Zhao Xijun, deputy dean at Renmin University’s school of finance and a ex- consultant to the securities regulator.
