China Regulators Crack Down On Major Brokerages, Shortsellers

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China Regulators Crack Down On Major Brokerages, Shortsellers

Financial market regulators in China have launched a new crackdown, including ongoing investigations of the largest brokerage houses, as Chinese stock markets have lost more than 40% of their value in just a couple of months.

Major Chinese brokerages Haitong Securities, GF Securities, Huatai Securities and Founder Securities all confirmed this week that they are being investigated by China Securities Regulatory Commission relating to “failure to review and verify the identity of clients in accordance with rules”.

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China’s largest stock broker, Citic, said it had “not received any notification” regarding a CSRC investigation. “We are in the process of gathering more information on this matter,” the company added.

Details on new investigations by China Securities Regulatory Commission

Brokerage firm Haitong released a statement saying that it planned to “fully co-operate” with the CSRC, and that business was continuing to operate as usual.

The share price of the brokerages under investigation were mixed on Wednesday. GF Securities gained 4.7% and Citic was down 2.3%.. Founder, listed in Shanghai, was off 4.3%.

According to Chinese news agency Xinhua and knowledgeable CSRC sources, a separate investigation has been initiated of eight people connected to Citic Securities for “illegal securities trading”.

Analysts note that these latest investigations by Chinese authorities come after announcements regarding enforcement actions against “malicious short selling” and market manipulation driving down equity prices.

In its efforts to halt the slide, he government of China has gone as far banning sales of personal stakes in firms by major shareholders and senior execs.

Knowledgeable sources report that the CSRC has begun investigations into a large number of companies for violating or trying to skirt the new rules.

If history is any guide, these actions (whether real or more likely trumped up) will have little effect and will almost certainly scare off foreign investors.

More on recent China stock market crash

China’s main Shanghai stock index notched a seven-year high in June, but has cratered since then, losing more than 40% of its value as of Tuesday.

The Shanghai Composite saw its largest two-day drop since 1996 this week, despite the Chinese government’s multiple efforts to support the market.

Also of note, in an attempt to stimulate the economy, the People’s Bank of China reduced its main interest rate on Tuesday, the second cut in the last 60 days and the fifth cut in the last nine months.

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