China shares hit after record stock manipulation fine

Shanghai (AFP) – Shares of three newly listed companies tumbled in China on Thursday after the country’s securities regulator issued a record fine over manipulation of their stocks, the latest move in an official crackdown on financial irregularities.

The China Securities Regulatory Commission said on Wednesday that it imposed a 5.5 billion yuan ($870 million) penalty on Shanghai-based logistics company Beibadao Group for manipulating the share prices of the three firms.

It was the largest penalty ever handed out in China for such an infringement, according to Chinese media reports.

Analysts said the fine impacted a number of stocks, offsetting strength in insurance and consumer shares and causing Chinese markets to end flat on Thursday.

The three affected companies are listed on China’s second exchange in Shenzhen.

Jiangsu Zhangjiagang Rural Commercial Bank dropped 7.68 percent to 8.90 yuan, Jiangsu Jiangyin Rural Commercial Bank fell 3.59 percent to 7.53 yuan and Guangdong Hoshion Industrial Aluminium lost 1.58 percent to 14.91 yuan.

“Some newly listed shares were affected by the record fine, dragging down the prices of small caps in the markets,” said Zhang Qi, an analyst with Haitong Securities. 

Regulators have become alarmed as Chinese companies made billions of dollars of sometimes questionable investments overseas in recent years, and as debt levels in the domestic economy soared.

The government has since moved aggressively over the past 18 months to stanch the flow of funds overseas, rein in debt, and crack down on irregularities in the financial system.

Among a number of recent moves, financial regulators last month took control of troubled insurer Anbang Insurance, saying the company’s debt-fuelled foreign acquisition binge left it in financial peril and that high-flying founder and former chairman Wu Xiaohui would be prosecuted for fraud.

China also unveiled plans this week for the biggest shakeup of government in at least a decade, including the merger of its banking and insurance regulators to better handle financial risks.