China investigates stock market manipulation

Beijing officials to investigate possible market manipulation as stocks tumble, losing trillions of dollars of share value

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

Chinese stocks have fallen by as much as 10 percent on Friday, increasing fears over a potential crash of the country’s stock market. Regulators announced on Thursday evening that they would be examining suspicious behaviour which may be manipulating the financial market. 

The China Securities Regulatory Commission (CSRC) has called on a team to examine "clues of illegal manipulation across markets," with the benchmark Shanghai Composite index plunging by about 30 percent since mid-June.

In an attempt to encourage long term investors to enter the market and help stabilise prices, China will cut initial public offerings, a CSRC spokesman said after the stock market closed.   

The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 5.4 percent to close at 3,885.92, while the Shanghai Composite Index declined 5.8 percent to 3,686.92 points.

Investors have become wary of trading in China’s volatile stock markets, with predictions of a crisis in the world's second largest economy trending amongst economists. Despite this, Chinese stocks have more than doubled over the last 12 months, mainly due to retail investors borrowing money. 

"With growth data still soft, China remains a key uncertainty for the global outlook,” said analysts at Barclays. 

According to the China Daily newspaper, the CSRC is probing investors who used stock index futures to "short" the market - or bet on prices falling.

Sources with direct knowledge of the issue told Reuters that the China Financial Futures Exchange (CFFEX) had suspended 19 accounts from short-selling for a month.

TRTWorld and agencies