China stocks stabilised in early trade on Monday, after falling more than 5 percent on Friday on news that the securities regulator had widened its probe into brokerages.

The Shanghai Composite index and the CSI300 both posted their biggest one-day drops in more than three months on Friday on signs that the securities regulator was clamping down on leveraged buying again.

On Monday, CSI300 rose 0.4 per cent to 3,570.57 points at 1:54 GMT, while the SSEC gained 0.4 per cent to 3,451.30 points.

Initial public offerings

Analysts said investors were on shifting their focus to a series of initial public offerings due this week which is likely to weigh on sentiment.

“The resumption of IPO will have more influence on the market,’’ said Du Changchun, an analyst at Northeast Securities in Shanghai.

“I see the SSEC index moving around 3,500 this week.’’

Clampdown on brokerages

Shares fell sharply in afternoon trade on Friday after Reuters reported China Haitong Securities is under investigation by the China Securities Regulatory Commission (CSRC) following similar probes into two other domestic brokers.

The brokerage later confirmed the news, saying in a statement published on the Shanghai stock exchange that it is being probed for possible violation of securities regulations.

In an apparent move to ease investor anxiety, Haitong and CITIC Securities, another brokerage being investigated, said in separate statements over the weekend that the probes were related to their margin trading businesses only.

Little has emerged as to the specific reasons for the investigations, but some analysts said the regulator could be trying to get a better grip on leveraged trading after a near full-blown market crash a few months ago.

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