The Shanghai Composite index suffered its biggest one day fall since the depths of the $5 trillion plunge which took place earlier this August as Chinese regulators begin to investigate several major brokerages.
Yesterday the index closed 5.5% lower at 3,436.30, having fallen by more than 6% earlier in the day. The fall came after it was announced late on Thursday that the China Securities Regulatory Commission is investigating CITIC Securities, the country’s largest brokerage. Two other brokerages later issued a similar announcement.
The probe into the finance industry is being seen by many as an attempt by the ruling Communist Party to assign blame for the sell-off which took place earlier this year and avoid scrutiny for the bursting of a bubble it arguably had a hand in engineering.
“Fresh investigations indicated the government clampdown on market malpractices is stricter than expected. It has a negative impact on investor sentiment” said Hong Hao, managing director and chief China strategist at BOCOM International.
More negative economic data on the Chinese economy also did little to boost investors’ confidence, with government figures showing that industrial profits in October fell 4.6% from a year ago.
In contrast to the turmoil which engulfed world markets during the summer, this time the massive fall in the value of Chinese stocks has had little impact on other major indexes, with most ending the day only slightly lower.
Previously on Shanghaiist:
Biggest one-day fall in China stocks since 2007 leads to global sell-off
Chinese stocks plunge a further 8 percent in second day of chaos
Journalist confesses to spreading false information about stock market, netizens call him ‘scapegoat’