The Securities Association of China will ban brokerages from offering financing for stock market trading using derivatives, the country’s securities regulator said.
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A plunge in Chinese stocks dragged Asian markets down yesterday after authorities launched a probe into several brokerages and profits at the country’s industrial giants sank far more than expected.
China shares fell over 1 per cent on Friday morning, heading for their biggest one-day drop in a month, hit by fresh regulatory crackdown on leverage activities and weak industrial profit data.
The Shanghai Composite Index ended the day down 5.5 per cent after declining as much as 6.2 per cent earlier.
Investors who might be interested in the Chinese stock markets, maybe could do better remaining on the side lines, as it is very unlikely we’ve seen the latest in the ongoing cleanup in the illegal margin trading practices over there.
Investor enthusiasm for small caps spread to blue chips as well, lifting sectors such as banks and infrastructure out of negative territory by late afternoon.
CITIC Securities and Guosen Securities lost 10%, the daily limit, after announcing they were being probed by the CSRC.
Yelp’s share price fell 18 percent over three days in April 2014, when the Federal Trade Commission revealed 2,046 complaints over five years against the San Francisco-based company.
During the summer, the Shanghai Composite Index, had fallen more than 40 percent from its peak and is now up 20 percent since August, according to the Journal.
China Haitong Securities is also under investigation by the CSRC for alleged violations of securities regulations, two people with knowledge of the matter told Reuters, declining to be identified because they were not authorised to speak to the media.
Shares of Citic Securities fell 0.7 percent in Shanghai.
In addition, trading in China Haitong Securities was halted earlier on Friday as some reports indicated that the firm was also under investigation.
Analysts have said that the government’s move is aimed at draining leverage and speculation from the market through the investigations, the Wall Street Journal reported.
Futures on the Standard & Poor’s 500 Index added 0.3 percent from Wednesday’s close.
Markets in the USA were closed Thursday for the Thanksgiving holiday.
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With Shanghai slumping more than six percent at one point, painful memories of sharp losses that wiped trillions of dollars off valuations came back to the fore.
