Asian stocks decline as China shares tumble

HONG KONG: Asian stocks declined yesterday, with a regional gauge heading for a one-week low, as Chinese shares tumbled the most since the depths of this year’s rout as some of the largest brokerages disclosed regulatory probes and the nation’s industrial profits fell.

With Shanghai slumping more than 6% 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% between a June 12 peak and mid-August on fears over China’s painful growth slowdown and profit-taking following a 150% surge over the previous year.

They have surged almost 25% 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 yesterday 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 yesterday 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 yesterday 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 yesterday’s losses were “totally different from the routs in July and August”.

Citic slumped by its 10% daily limit in Shanghai and almost 5% in Hong Kong, while Shenzhen-listed Guosen also tumbled 10%.

Shanghai’s stock market ended the day 5.5% lower, while Shenzhen’s composite index, which tracks stocks on China’s second exchange, slumped 6.1%.

The sell-off reverberated around Asia, with Hong Kong ending down 1.9%, while Sydney lost 0.2% and Seoul shed 0.1%. 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.