ASIA MARKETS: China Shares Plunge 4% As Brokers Probed Over Violations
November 27 2015 - 1:57AM
Dow Jones News
By Chao Deng
Citic Securities, Guosen Securites both being investigated
Chinese authorities' investigations into two major Chinese
brokerages over suspected violations pressured shares in Shanghai
Friday, dragging the market lower for the week.
The Shanghai Composite Index was on track to lose 4% this week,
with most of the losses on Friday, when the benchmark fell 4.6%.
.
Worries over China's financial-market investigations also
weighed on Hong Kong's Hang Seng Index which fell 1.8% on Friday
and is on track to lose around 3% for the week.
In Japan, shares fell 0.3% Friday after the Nikkei neared the
20000 level earlier this week. Australia's S&P/ASX 200 fell
0.2% and South Korea's Kospi fell 0.1%.
On Thursday, China's largest stock broker, Citic Securities Co.
(600030.SH), said it would cooperate with the country's stock
regulator in an investigation of the firm for suspected violation
of securities rules. Guosen Securities (002736.SZ) , China's
third-largest broker by assets, said it is under investigation for
suspected violations, too, according to a company filing.
Shares of Citic fell 6.6% in Shanghai and 4.2% in Hong Kong on
Friday. Shares of the Hong Kong-listed Guosen lost 6%.
Shares of Haitong Securities (600837.SH) fell 3.8% in Hong Kong,
before the brokerage issued a trading halt after the market opened
without citing reasons.
Chinese authorities' increased scrutiny of the securities
industry is part of a crackdown that has ranged from targeting
"malicious" short sellers to arresting star fund managers in the
wake of the summer stock rout. The Shanghai Composite Index, which
fell more than 40% from peak to trough during the summer, is now up
more than 20% from its August lows.
Analysts say officials' moves aim to drain leverage and
speculation from the market. Investors who borrowed heavily to buy
shares fed a yearlong rally through June, though the unwinding of
those loans also accelerated losses over the summer.
A two-month rebound in margin loans has stalled recently with
loans reaching 1.22 trillion yuan ($190.94 billion) as of Thursday,
according to Wind Information Co.
Loans fell below 1 trillion yuan in late September, when the
market's fall forced the unwinding of bets by brokerages.
Regulators also have said they are looking for signs of
irregularities in the industry. Earlier this week, the
quasi-regulatory Securities Association of China said Citic
overstated its swap transactions numbers between April and
September.
"The government wants to foster a stock market that can support
the real economy, not one that allows speculative investors to
profit from derivatives products," said Guotai Junan's analyst
Zhang Xin.
Earlier this week, metals including copper and nickel fell to
multiyear lows. Metals rebounded Thursday after reports that China
will start buying industrial metals to stock up its strategic
reserves.
Still, the materials sector on the Hang Seng and Australia's
S&P/ASX 200 indexes is down 3.6% and 4.5% this week,
respectively.
The broader S&P/ASX 200 is down 1.1% week-to-date, after
jumping 4.1% the previous week, its best week in over a month.
In Japan, a weakening yen lifted the Nikkei close to the 20000
level earlier this week, though shares retreated Friday. The yen
was last at Yen122.59 to one U.S. dollar, roughly flat from late
Thursday in Asia.
The currency has weakened since mid-October, when it reached as
strong as Yen118.04 to one U.S. dollar. A weaker local currency
bodes well for Japanese exporters that repatriate profits from
abroad.
Investors are also hopeful that Japan's central bank will extend
stimulus, after minutes show officials are open to further action
if inflation targets slip out of reach.
On Friday, data showed that consumer prices in Japan fell
slightly for the third month in a row in October. The figures
indicated that sustained inflation remains elusive despite the
central bank's efforts to spark price growth. Some economists have
forecast that flat lining inflation may force the bank and some of
its peers to ease again.
Markets in the U.S. were closed Thursday for the Thanksgiving
holiday.
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(END) Dow Jones Newswires
November 27, 2015 01:42 ET (06:42 GMT)
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