The authorities in China have opened two investigations into the country's biggest brokerage firms amid market turmoil.
The police are investigating eight executives from Citic Securities, China's biggest brokerage firm, on suspicion of illegal securities trading, Xinhua, the official news agency, reported late Tuesday.
In addition, staff members from the main stock market regulator, China Securities Regulatory Commission, and a reporter were been taken into custody, Xinhua said.
The reporter, from the respected news outlet Caijing, was identified by Caijing as Wang Xiaolu and wrote an article last month that said the government was considering withdrawing its support for the stock market. The report prompted a denial from the securities regulator, but was later seen as contributing to a huge plunge in Chinese stocks in late July.
Four other top brokerage firms said in announcements late on Tuesday that they were being investigated by the securities regulator over suspected violations of China's laws on verifying the identity of securities clients. The companies, Haitong Securities, GF Securities, Founder Securities and Huatai Securities, said that they would cooperate with the investigation and that their businesses were operating normally.
Chinese officials have used such investigations in the past to help tamp down frothy markets. But given the current slump, such inquiries, including one this month that encroached on a securities trading affiliate of Citadel, the big American hedge fund, appeared more aimed at bolstering investors' confidence.
Michael Pettis, a finance professor at Peking University and a senior associate at the Carnegie Endowment for International Peace, said that the problem with the government's efforts to support the markets was that success depended greatly on public perception of its credibility.
"Beijing can signal all it likes when it comes to the stock market," he added, "but it can only cause prices to rise if it purchases large amounts of stocks; signaling no longer works."
©2015 The New York Times News Service
