China punishes three firms blamed for stock volatility

SEP 4, 20152:48 PM

[SHANGHAI] China's market regulator has fined three companies, including Alibaba-linked Hundsun, a combined 453 million yuan (S$100.9 million) for conducting "illegal securities business", which has been blamed for volatility on the plunging markets.

The moves come as Chinese authorities mount broad attempts to shore up share prices after the benchmark Shanghai index plunged 30 per cent in three weeks from mid-June following a debt-fuelled rally which sent the market up 150 percent in a year.

The continuing falls come alongside worries about slowing growth in the world's second-largest economy that have sent shudders through global bourses.

The China Securities Regulatory Commission (CSRC) also confiscated a total 151 million yuan in "illegal income" from Hangzhou Hundsun Network Technologies Service Co, Mecrt Corp, and Hithink RoyalFlush Information Network Co, it said in a statement.

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The three firms developed systems which enabled investors to trade stocks without giving their real identities, allowing the firms to profit by "knowingly" providing the software to unqualified clients, the CSRC statement said.

They "severely disrupted security market order", it said.

Earlier this week, China's main state broadcaster paraded a financial journalist "confessing" to causing the stock market "great losses" as authorities seek to rein in the rout.

Wang Xiaolu, a journalist with the respected business magazine Caijing, was held after writing a story in July saying the regulator was studying plans for government funds to exit the market.

The CSRC started investigating the three companies in July, and its statement late Wednesday said it also fined and warned their top executives personally.

E-commerce giant Alibaba's affiliate Ant Financial - a financial services provider focused on serving small companies - holds a 20 per cent stake in Hundsun Network's parent company Hundsun Technologies.

Hundsun Technologies closed down 3.14 percent on the Shanghai exchange and Hithink RoyalFlush Information Network gained 2.19 per cent in Shenzhen trading on Wednesday, the last day of trading this week before a market holiday.

AFP