Chinese brokerages face probes into financing businesses amid stock rally

The mainland's regulator will conduct on-site probes into securities firms' margin trading and short-selling businesses, in the latest effort to cool a buying spree that drove the key indicator up 20 per cent in the past three weeks.

Deng Ge, a spokesman for the China Securities Regulatory Commission, said yesterday that some brokerages would be inspected soon to "ensure the healthy development of the financing businesses", according to a statement posted on the regulator's microblog.

Deng's remarks confirmed mainland media reports earlier that the commission was wary of risks in the soaring margin trading business as unseasoned investors chased the sudden rally.

Outstanding margin loans offered by brokerages were valued at more than 900 billion yuan (HK$1.1 trillion) yesterday, more than double the amount in the first half of this year.

On Tuesday, the combined turnover on the Shanghai and Shenzhen stock exchanges hit a record high of 1.24 trillion yuan as the benchmark Shanghai Composite Index slumped 5.4 per cent following a 23.3 per cent jump since November 20.

The roller-coaster ride on the share market prompted the regulator to step in to curb irrational buying with retail investors convinced that the market had turned into a bullish mode.