Chinese shares tumbled again yesterday as investors’ fears about the economy were exacerbated by a crackdown on illegal trading that has snared the head of China’s largest brokerage.
The securities regulator tried to calm investors’ nerves about its crackdown on illegal margin financing by stating late on Monday that its drive would not have a big impact on the market. Investors were still worried, however, and the Shanghai Composite slumped by 3.52 per cent and the Shenzhen index by 4.98 per cent.
They may react badly again today to confirmation last night that police are investigating the president of Citic Securities, China’s largest brokerage, and several other executives for possible insider trading and the leaking of inside information. Citic boasts the strongest political connections of any brokerage.
Zhang Qi, an analyst at Haitong Securities, said: “The market took the crackdown on accounts engaged in illegal trading harder than what the market regulator said. And the falling prices in turn strengthened selling momentum. Someone has to pay the price.”