Mainland shares fall as regulator launches new probe into margin trading

Mainland exchanges fell on Thursday after the country's stock market regulator unveiled a fresh probe into brokerages.

The benchmark Shanghai Composite Index declined by 1.31 percent or 43.43 points to 3,262.31 points on Thursday. The Shenzhen Component Index fell by 0.93 percent or 105.16 points to 11,249.04 points.

The CSI 300 Index of the biggest companies traded on the bourses in Shanghai and Shenzhen dropped by 1.23 percent to 3,481.80 points.

Total turnover on the two bourses on Thursday was 528.94 billion yuan ($84.74 billion), down from Wednesday's 606.47 billion yuan.

The China Securities Regulatory Commission (CSRC) has launched a fresh probe into brokerages that are lending money to investors to speculate on stocks, amid concerns that the country's markets are becoming over-leveraged and vulnerable to a crash that could strain the banking system.

The regulator will inspect the stock margin trading business of 46 companies, the Xinhua News Agency said.

In addition, banks have been ordered to tighten lending supervision to avoid loans being funneled into stock markets. Chinese banks' bad debt ratios are already at five-year highs and a sudden correction in the stock market could expose them to significant additional risks.

Mainland stocks fell on Thursday, but the drop was relatively mild compared to the near 8 percent plunge they suffered on January 19 after the CSRC punished three top brokerages for illegal conduct in their margin trading business.

ChiNext, China's NASDAQ-style board for high-tech and fast-growing start-ups, fell by 1.16 percent or 20.04 points to 1,711.37 points.

In Hong Kong, the Hang Seng Index edged down by 1.07 percent to 24,595.85 points, with total turnover of HK$89.47 billion ($11.54 billion).