By Pete Sweeney and Donny Kwok
SHANGHAI/HONG KONG (Reuters) - Shares in CITIC Securities, China's biggest brokerage, fell on Wednesday after the company said some senior managers are under police investigation as part of a probe by Beijing into possible market manipulation linked to the slump in its stock markets.
Authorities are looking at whether market malpractices contributed to the plunge in Chinese equities, which have fallen around 40 percent since mid-June.
CITIC 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 embroiled in Beijing's market manipulation probes so far. He forms part of the seven-member executive committee overseeing China's flagship investment bank, which has a dominant position in the country's equity markets.
The brokerage has formed a core part of the so-called "national team", a collection of state-linked banks, brokers and funds called on by Beijing to buy up shares and help stabilise equity markets following the sell-off.
More From This Section
But it has also already been caught up in the market manipulation probes. 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, though they recovered some of those losses to be down 1.4 percent by 0602 GMT. Its Shanghai-listed shares were down 1 percent.
The probe didn't weigh heavily on the broader Chinese stock markets, which steadied after losing 6 percent through Monday and Tuesday.
The benchmark CSI300 index of the biggest listed stocks in Shanghai and Shenzhen was up 0.6 percent while the Shanghai and Shenzhen Composite Index rose 0.7 percent. In Hong Kong, the Hang Seng was up 1.4 percent.
Traded volumes remained light though, 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)
(Writing by Rachel Armstrong; Editing by Neil Fullick)