China Stocks Extend Biggest Selloff Since 2008 on Rescue Doubts

31 Aug 2015 | Author: | No comments yet »

China Brokers Tumble as Citic Staff Detained, Rescue Costs Grow.

Brokerages led a 1.7 percent retreat in the Shanghai Composite Index on Monday after the securities regulator was said to order the industry to boost its contribution to the nation’s market rescue fund. China has punished 197 people in a special campaign by police targeting online rumors about China’s stock market, the recent fatal explosions in Tianjin and “other key events”, Al Jazeera said quoting China’s state media reports. The China Securities Regulatory Commission gave the order on rescue-fund contributions at a meeting with representatives of 50 brokerages on Saturday (Aug 29), which CSRC Chairman Xiao Gang also attended, said the people, who asked not to be identified because the meeting hasn’t been made public. No details of the punishments were given, but according to the report, the crimes punished included claiming a man had jumped to his death in Beijing due to the stock market slump and falsifying the number of people who had died in the Tianjin blasts.

Swings in Chinese markets this month have rattled investors worldwide as they struggle to anticipate policy actions in the world’s second-largest economy. China revived its stock-market rescue program on Aug 27 after the government’s absence from the market earlier in the week contributed to the biggest two-day sell-off since 1996. Stocks rallied almost 10 percent over Thursday and Friday on speculation authorities are propping up markets before President Xi Jinping takes the stage at the parade, which the government will use to demonstrate its rising military and political might. “There is a lot of confusion about purchases of stocks by state-linked funds,” said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group Co. in Shanghai. “Disclosures are very limited so it is impossible to know what they are doing with certainty.” The Shanghai gauge declined for the first time in three days, losing 59 points to 3,173.62 at 2:17 p.m. and taking its decline this month to 13 percent after plunging 14 percent in July. Xinhua reported that authorities had also detained an official from China’s securities watchdog and four senior executives of the country’s major securities dealer for “stock market violations”. After a $5 trillion stock rout, Chinese officials trying to stabilize the market are mixing state-mandated share purchases with a campaign highlighting government efforts to crack down on alleged manipulation.

Formal arrest in China normally comes after some time in police detention, when the case is handed to prosecutors, with trial and conviction almost guaranteed. Tags: Caijing magazine report, China crackdown on online rumormongers, China punishes 197 online rumormongers, Chinese journo says report created panic in stock market, Liu Shufan in insider trading, report in Caijing, seditious rumors about China’s war parade, Wang Xiaolu

Wang Xiaolu, a journalist for Caijing, admitted wrongly reporting on July 20 that the CSRC was studying an exit from support measures, causing panic and confusion, Xinhua said. Four executives of Citic Securities, the nation’s largest brokerage, a journalist at business magazine Caijing and a staff member at the CSRC all confessed to alleged stock-related crimes, Xinhua said. Liu Shufan, a CSRC staff member, admitted making millions of yuan from insider trading in shares of two companies last year and also to forging documents in connection with an apartment purchase, Xinhua said. China Construction Bank Corp. lost 0.8 percent as the lender joined its domestic rivals in reporting zero profit growth in the first six months of the year. Puts that pay out on a 10 percent drop in the China 50 exchange-traded fund cost 9.3 points more on Monday than calls betting on a 10 percent gain, according to implied volatility data on one-month contracts.

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