AFP, HONG KONG: 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. With Shanghai slumping more than six per cent at one point, the sharp losses brought back painful memories of the panic-driven sell-off that struck China's equities markets in the summer, wiping trillions of dollars off valuations. Shares crashed 40 per cent between a June 12 peak and mid-August on fears over China's painful growth slowdown and profit-taking following a 150 per cent surge over the previous year. They have surged almost 25 per cent since that trough after authorities unveiled various measures to prevent further selling -- including suspending new listings -- and government-back funds bought vast quantities of equities. However, this month regulators said they would resume initial public offerings, fanning fears cash would be diverted from established chips and soak up liquidity. Selling intensified Friday after Beijing said industrial profits fell more than forecast in October, and reinforcing worries about the world's number two economy, a key driver of global expansion. Meanwhile, the country's biggest brokerage Citic Securities said Thursday it was being probed for suspected "rule violations" as
officials crack down on financial firms in the wake of the summer sell-off.
And on Friday another giant, Guosen Securities, said it was being probed, while second-ranked Haitong Securities halted trading of its shares in Shanghai and Hong Kong. "The biggest reason for such a sudden drop today is because of regulators' investigation of the top brokers. It has triggered a broader sell-off," Phillip Securities analyst Chen Xingyu told AFP. "(The) investigation suggests the firms could be in some serious trouble," he said. But he added Friday's losses were "totally different from the routs in July and August".
Citic slumped by its 10 per cent daily limit in Shanghai and almost five per cent in
Hong Kong, while Shenzhen-listed Guosen also tumbled 10 per cent. Shanghai's stock market ended the day 5.5 per cent lower, while Shenzhen's composite index, which tracks stocks on China's second exchange, slumped 6.1 per cent. The sell-off reverberated around Asia, with Hong Kong ending down 1.9 per cent, while Sydney lost 0.2 per cent and Seoul shed 0.1 per cent. There were also big losses in Singapore, Taipei and Manila.
Japan's Nikkei ended in the red after the government said prices fell last month, while consumer spending also dropped, overshadowing news that unemployment was at a two-decade low. Prime Minister Shinzo Abe will come under fresh pressure from the results as his programme of big spending and massive monetary easing -- aimed at kick-starting growth and ending deflation -- struggles to kick in.