By Pete Sweeney and Donny Kwok
SHANGHAI/HONG KONG (Reuters) - China shares jumped almost 5 percent on Wednesday on suspected government intervention, with a flurry of buying just before the market close helping to undo much of the losses posted on Chinese stock exchanges earlier this week.
The late rally included shares in CITIC Securities, China's biggest brokerage, which said late on Tuesday that some of its senior managers were under police investigation as part of a probe into possible market manipulation.
A last minute spike in trade pulled up China's key equity indexes, a phenomenon markets generally interpret as government intervention to push up values before the closing bell.
Beijing is trying to prop up its beleaguered stock markets, which have fallen around 40 percent since mid-June, calling on its so-called "national team" of state-linked banks, funds and brokerages to buy up shares.
Regulators have also tightened control over stock exchanges and currency markets to quell a tumultuous period of volatility and root out those behind what they have called "malicious trading".
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In the latest regulatory move, China took aim at the country's commodity exchanges, spooked that speculators have shifted from stocks to futures trading in the likes of iron ore and rubber.
CITIC is a core part of the national team, but has also become embroiled in Chinese authorities' probes into whether market malpractices have contributed to the plunge in stock prices.
The brokerage said late on Tuesday that three company officials, including its general manager, Cheng Boming, are being investigated for alleged insider trading and leaking information.
Cheng is one of the most senior financial executives known to have been caught up in Beijing's market manipulation probes so far. He forms part of the seven-member executive committee overseeing China's flagship investment bank, which is the country's largest broker by market capitalisation.
State media have previously reported that four senior CITIC executives confessed to insider dealing in August.
Apart from confirming that Cheng and two other officials were being investigated, CITIC has declined to comment.
CITIC has spent the past three years trying to boost its overseas presence and expand into asset management and complex derivatives. In 2012 it paid $1.3 billion for the Asia-focused brokerage CLSA and has also established brokerage units in several overseas markets including the United States.
The brokerage booked a net profit of 11.3 billion yuan ($1.77 billion) in 2014 with revenues of 39.5 billion.
CITIC's Hong Kong-listed shares dropped more than 4 percent in early trading on Wednesday, but reduced those losses to close 0.7 percent lower. Its Shanghai-listed shares jumped 6.95 percent higher.
More broadly, Chinese stocks on Wednesday enjoyed their biggest single-day percentage gain since August 27.
The benchmark CSI300 index of the biggest listed stocks in Shanghai and Shenzhen finished up 4.98 percent while the Shanghai Composite Index rose 4.91 percent. In Hong Kong, the Hang Seng closed up 2.38 percent.
The jump comes after stocks fell 6 percent over Monday and Tuesday, raising fears that a significant slide was on the cards.
Small-cap stocks, which took the brunt of the selling at the start of the week, posted the day's biggest gains, with the CSI300 IT Index up more than 9 percent. More than 1,000 stocks ended at the 10-percent limit-up threshold.
Traded volumes remained relatively light though despite the late flurry of buying, with many investors opting to stay on the sidelines given persistent concerns about China's economy and the possibility of an interest rate hike in the United States.($1=6.3696 yuan)
(Additional reporting by Engen Tham; Writing by Rachel Armstrong; Editing by Neil Fullick)