Regulator to probe 2 firms over meltdown
Print Edition
China Securities Regulatory Commission has organized law enforcement units to inspect another two companies for signs of margin financing through unofficial channels.
Following leads from the previous probe on Hangzhou-based financial software company Hundsun Technologies, the CSRC has sent investigators to Shanghai MecrtSoft Tech Co and Hithink RoyalFlush Information Network Co to search for further clues, said CSRC spokesman Zhang Xiaojun.
The CSRC visited Hundsun on July 13. The company鈥檚 HOMS service, designed to facilitate trading by small assets managers, is said to have been used by investors for margin financing outside approved channels that fueled the drastic volatility in the market.
Hundsun later replied by saying HOMS is just a 鈥渢echnical tool鈥 for private funds, and said the suggestion that the system triggered chaos in China鈥檚 stock market over the past weeks was 鈥渧ery much biased and unprofessional.鈥
On July 16, the company said it had taken steps to stop speculators using one of its systems to buy stocks using risky leverage.
The widespread use of leverage, a practice of using borrowed money to buy shares, has been blamed for the drastic ups and downs in the stock market.
Before the market plunged on June 12, the Shanghai Composite had risen by 152 percent since July 2014 and nearly 60 percent since the beginning of this year, galloping far ahead of economic fundamentals during the period. Although the government has stepped in with a string of stabilizing policies, market confidence seems hard to restore.
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