China probes market rout
July 3, 2015
After a selloff of nearly 30 percent in Chinese stocks since mid-June, the China Securities Regulatory Commission (CSRC) said Friday it had set up a team to look at "clues of illegal manipulation across markets."
Chinese markets were among the world's best performers earlier this year, with the Shanghai Stock Exchange rising more than 150 percent over 12 months in a spectacular borrowing-fuelled bull run that peaked on June 12. But it has since lost almost 30 percent of its value, putting it firmly in bear market territory.
CSRC said in a statement it would base its investigation on reports of abnormal market movement from the stock market and futures exchanges.
"Those suspected of a crime will be resolutely transferred to the police for investigation," CSRC spokesman Zhang Xiaojun said in comments on the regulator's official microblog.
Shortsellers blamed
On Friday China's CSI300 index of the largest listed companies in Shanghai and Shenzhen dropped 5.4 percent, extending its losses this week to 12.1 percent. The Shanghai Composite Index shed 5.8, falling below 4,000 points for the first time since April.
The China Daily newspaper suggested in its Friday edition that the CSRC was probing foreign investors who used stock index futures to "short" the market - or bet on prices falling. And sources with direct knowledge later told the news agency Reuters that the China Financial Futures Exchange (CFFEX) had suspended 19 accounts from short-selling for a month.
But an editorial in the Global Times, which is affiliated with the Communist Party mouthpiece People's Daily, denied that overseas investors were capable of manipulating Chinese shares markets.
"Foreign capital has only a small part of the Chinese stock market," it said, which would make large-scale short selling by foreign investors an "unlikely scenario."
Homemade problems
The rout in China's highly leveraged stock market has become a major worry for global investors, who fear a meltdown could destabilize the world's second-largest economy at a time when growth is already slowing.
Analysts believe the market slump reflects investors' unease about new margin-trading restrictions. Margin trading, where investors borrow money from brokers to buy stocks, had fuelled recent rises in the stock market and raised concerns that margin debt has created a bubble.
Beijing has been struggling since the weekend to find a policy formula that would restore confidence in its stock markets. A move by China's central bank on Saturday to cut both interest rates and the reserve ratio for commercial banks have failed to ease pressure on the market.
uhe/bk (dpa, AFP, Reuters)