Chinese stocks’ 5.5% dip biggest 1-day fall in months

HONG KONG — Just when it looked as if a relative calm was returning to Chinese markets, stocks nosedived again Friday, with the main Shanghai share index losing 5.5 percent.

Shares had been on the rebound in recent months, after a summer of turbulent trading set off by the Chinese government’s attempt to prop up the market and by the central bank’s surprise devaluation of the currency, the renminbi, in August.

From its recent low in late August, the main Shanghai index had risen 24 percent, to 3,635.55 points, as of Thursday.

In percentage terms, the plunge of nearly 200 points Friday was the biggest singleday drop for Shanghai stocks in three months.

In the sell-off, investors appeared to be cashing out of their holdings to invest in new initial public offerings set for next week. The IPOs are the first to be allowed since July, when the government banned new listings.

IPOs had been a popular investment, as most companies rose by the maximum 44 percent allowable on the first trading day, with subsequent trading capped at a gain or loss of 10 percent. The big first-day spikes were the result of speculative investment and of government policy designed to make sure deals did not overvalue the businesses being listed.

Investors also were reacting Friday to recent developments in Beijing’s crackdown on the financial industry. Citic Securities, China’s biggest brokerage firm, and its smaller rival Guosen Securities announced late Thursday that they had been placed under investigation by China’s

securities regulator.

Citic Securities already had been the target of multiple official investigations in recent months, and the nature of the new investigation was unclear.

This week, the Securities Association of China said Citic Securities had overstated the size of its stock derivatives business between April and September by about $172 billion.

The brokerage firm said that was the result of a reporting error and had been corrected.

In addition to the new inquiries into Citic Securities

and Guosen, Guotai Junan International Holdings, the Hong Kong unit of one of China’s other big brokerage firms, said this week that the company had been unable to make contact with its chairman for several days.

It is appointing a temporary replacement executive.

New gloomy economic data also may have weighed on investors in China’s stock markets.

Figures released Friday by the country’s statistical agency showed industrial profits had fallen 4.6 percent in October from the level of a year earlier.

That compared with a 0.1 percent decrease in September.