China stocks plunge sparks Asian sell-off

A plunge in Chinese stocks triggered by a probe into several brokerages and profits sinking by far more than expected at the country's industrial giants dragged down Asian markets on Friday.

But the turbulence failed to spread beyond Asia, with European only drifting down and US indices holding steady, unlike last August when a panic-driven sell-off in China sparked volatility in markets across the world.

With Shanghai slumping more than six percent at one point, painful memories of sharp losses that wiped trillions of dollars off valuations came back to the fore.

Shares crashed 40 percent between a June 12 peak and mid-August on fears over China's painful growth slowdown and profit-taking following a 150 percent surge over the previous year.

They have risen almost 25 percent since that trough after authorities unveiled various measures to prevent further selling -- including suspending new listings -- and government-backed funds bought vast quantities of equities.

However, this month regulators said they would resume initial public offerings, fanning fears cash would be diverted from established chips and soak up liquidity.

Selling intensified Friday after Beijing said industrial profits fell more than forecast in October, and reinforcing worries about the world's number two economy, a key driver of global expansion.

Meanwhile, the country's biggest brokerage Citic Securities said Thursday it was being probed for suspected "rule violations" as officials crack down on financial firms in the wake of the summer sell-off.

And on Friday another giant, Guosen Securities, said it was being probed, while second-ranked Haitong Securities halted trading of its shares in Shanghai and Hong Kong.

"The biggest reason for such a sudden drop today is because of regulators' investigation of the top brokers. It has triggered a broader sell-off," Phillip Securities analyst Chen Xingyu told AFP.

"(The) investigation suggests the firms could be in some serious trouble," he said. But he added Friday's losses were "totally different from the routs in July and August".

- More woes for Abe -

Citic slumped by its 10 percent daily limit in Shanghai and almost five percent in Hong Kong, while Shenzhen-listed Guosen also tumbled 10 percent.

Shanghai's stock market ended the day 5.5 percent lower, while Shenzhen's composite index, which tracks stocks on China's second exchange, slumped 6.1 percent.

The sell-off reverberated around Asia, with Hong Kong ending down 1.9 percent, while Sydney lost 0.2 percent and Seoul shed 0.1 percent. There were also big losses in Singapore, Taipei and Manila.

Japan's Nikkei ended in the red after the government said prices fell last month, while consumer spending also dropped, overshadowing news that unemployment was at a two-decade low.

Prime Minister Shinzo Abe will come under fresh pressure from the results as his programme of big spending and massive monetary easing -- aimed at kick-starting growth and ending deflation -- struggles to kick in.

The economy slipped into recession in July-September -- for the second time since Abe took office in December 2012 -- and there is growing speculation the Bank of Japan will ramp up its bond-buying, which effectively prints cash in a bid to boost lending.

European markets only drifted down despite the sharp falls in Asia.

"The reaction to the Chinese sell-off... in European stock markets has been limited," said CMC Markets analyst Jasper Lawler.

But they also failed to win a boost of from the consumer confidence in the eurozone coming in higher than expected at 106.1, the highest reading of the EU's index since May 2011.

Meanwhile Wall Street tried to push higher as US traders returned from the Thanksgiving Day holiday.

- Key figures around 1630 GMT -

London - FTSE 100: DOWN 0.3 percent at 6,375.15 points (close)

Frankfurt - DAX 30: DOWN 0.2 percent at 11,293.76 (close)

Paris - CAC 40: DOWN 0.3 percent at 4,930.14 (close)

EURO STOXX 50: DOWN 0.2 percent at 3,490.15

New York - Dow: DOWN 0.03 percent at 17,808.35

New York - S&P 500: UP 0.2 percent at 2,092.31

New York - Nasdaq: UP 0.3 at 5,132.43

Tokyo - Nikkei 225: DOWN 0.3 percent at 19,883.94 (close)

Hong Kong - Hang Seng: DOWN 1.9 percent at 22,068.32 (close)

Shanghai - composite: DOWN 5.5 percent at 3,436.30 (close)

Dollar/yen: UP to 122.85 yen from 122.57 yen late Thursday

Euro/dollar: DOWN to $1.0591 from $1.0613