Shanghai stocks crashed over 6 per cent at the close on Friday as the country’s key benchmark posted its worst three-week decline since 1992, with Beijing's several stimulus measures failing to shake shares out of their prolonged funk. Market regulator China Securities Regulatory Commission said it would investigate market manipulation and short selling as stocks moved decisively into bear market territory after tanking the past three weeks. The Shanghai Composite index plunged as much as 7.2 per cent at one stage in the morning, before finishing down 5.77 per cent or 225.85 points to 3,686.92. It was the worst close for Shanghai since March. The Shenzhen Composite dropped 5.3 per cent or 117.34 points to 2,098.48 and the ChiNext Board retreated 1.66 per cent, or 44.04 points, to 2605.28. Shanghai and Shenzhen Composites have retreated 29 and 32 per cent respectively over the past three weeks, effectively shoving a market that had hit 7-year highs on June 12 into bear market territory. The China Daily newspaper said on Friday the CSRC was probing investors who used stock index futures to short the market and the industry watchdog would send criminal cases to the police. http://www.scmp.com/business/markets/article/1831889/chinas-stock-market-regulator-opens-probe-market-manipulation On Thursday, Shanghai’s benchmark index dropped below the psychological 4,000 points for the first time since mid-April, a critical level analysts had expected Beijing to defend by announcing several stimulus measures that has failed to ignite a rally in shares. “The current bearish sentiment makes further policy stimulus more likely with a relatively long halt to new IPOs looking possible,” said Gerry Alfonso, a trader at ShenyinWangu Securities in Shanghai. “The market experienced a small recovery in the last few minutes of trading but it was not even close to enough to cancel the previous losses.” “It is very likely that the market will have yet another very volatile day as investors are disappointed with Beijing’s decision not to cut the stamp duty fee and there are some concerns regarding the suitability of some of the assets allowed as collateral for margin trading,” Alfonso added. The China Financial Futures Exchange had suspended 19 accounts from short-selling for one month, Reuters said in a report quoting unnamed sources. On the other hand, shares in Hong Kong were lower but the losses were not as severe as on the mainland. The Hang Seng index fell 271.4 points or by 1.03 per cent to trade at 26,010.92 by 3:30 pm. The market ends trading at 4 pm. Shares in Hong Kong Exchanges and Clearing Ltd., recently the most heavily traded stock in that market, fell 1.6 per cent to a one-month low of HK$264.4, while shares in insurance giants China Life and Ping An Insurance each dropped 1 per cent. Investors on the mainland seemed unmoved by a mixed outlook for the US Federal Reserve to start raising interest rates as early as September or possibly delay it into December. On Thursday, the S&P 500 index dropped slightly by 0.1 per cent to 2,076, while the pan-European FTSE Eurofirst 300 index gave up 0.4 per cent. US markets are closed on Friday for a holiday as most traders were looking ahead to the results of the Greek referendum on Sunday which could go a long way to determine their future in the euro zone. A rejection by the Greeks of the bailout package by the country’s creditors could cause further volatility in financial markets next week, traders said.