This morning in Chinese trading, stocks took their worst fall in 10 years over investor concerns the Chinese government may begin cracking down on illegal investments that have helped fuel record-breaking gains in its indexes. The Shanghai and Shenzhen 300 Index fell 9.2%, giving back most of its 13% gains it had amassed over the previous six sessions when it climbed 13% and closed yesterday at record highs. The State Council, China's highest ruling body, yesterday appointed a task force to crack down on illegal share offerings and give guidance on securities regulations and policies. On Feb. 6, Cheng Siwei, vice chairman of the National People's Congress, wrote in a commentary that the government must pay attention to "bubbles" in its stock market before they get out of hand. "People are worried that more tightening measures may come out," said Mona Chung of Daiwa Asset Management Ltd. in Hong Kong. The National People's Congress' annual session begins March 5.
Sources: Bloomberg, MarketWatch
Commentary: Stumbling Blocks On China’s Path To Power • Chinese Blue Chips Soar to the Stratosphere • Profiting From China's Population Policy
Stocks/ETFs to watch: iShares Trust FTSE-Xinhua China 25 Index Fund (NYSEARCA:FXI), PowerShares Golden Dragon Halter USX China Portfolio (NYSEARCA:PGJ)
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