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| Chinese Stocks Plunge 5.5%, Their Biggest Single-Day Drop in 3 Months | Chinese Stocks Plunge 5.5%, Their Biggest Single-Day Drop in 3 Months |
| (about 1 hour later) | |
| HONG KONG — Just when it looked as if a relative calm was returning to Chinese markets, stocks nose-dived again on Friday. The main Shanghai share index lost 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. | 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. | 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 on Friday was the biggest single-day drop for Shanghai stocks in three months. | In percentage terms, the plunge of nearly 200 points on Friday was the biggest single-day drop for Shanghai stocks in three months. |
| In the sell-off, investors appeared to be cashing out of their current holdings to invest in initial public offerings set for next week. The I.P.O.s are the first to be allowed since July, when the government banned new listings. | |
| I.P.O.s 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. | I.P.O.s 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 were also reacting on 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. Friday night, Haitong Securities, another large brokerage, announced it too was under investigation. | |
| Citic Securities had already 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 an aggregate 1.1 trillion renminbi, or about $172 billion. The brokerage firm said that was the result of a reporting error and had been corrected. | Citic Securities had already 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 an aggregate 1.1 trillion renminbi, or 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. | 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 may also have weighed on investors in China’s stock markets. Figures released by the country’s statistical agency on Friday showed that 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. | New gloomy economic data may also have weighed on investors in China’s stock markets. Figures released by the country’s statistical agency on Friday showed that 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. |
| Markets in Europe opened down, with the FTSEurofirst 300 dropping 0.7 percent at 1,505.51 points after posting its highest close since August on Thursday. The main exchanges in Britain, Germany and France all started the day on a down note as well. | Markets in Europe opened down, with the FTSEurofirst 300 dropping 0.7 percent at 1,505.51 points after posting its highest close since August on Thursday. The main exchanges in Britain, Germany and France all started the day on a down note as well. |
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