China shares plunge 4% as brokers probed

Chinese authorities’ investigations into two major Chinese brokerages over suspected violations pressured shares in Shanghai Friday, dragging the market lower for the week.

The Shanghai Composite Index SHCOMP, -4.55% was on track to lose 4% this week, with most of the losses on Friday, when the benchmark fell 4.6%. .

Worries over China’s financial-market investigations also weighed on Hong Kong’s Hang Seng Index HSI, -1.77% which fell 1.8% on Friday and is on track to lose around 3% for the week.

In Japan, shares fell 0.3% Friday after the Nikkei NIK, -0.30% neared the 20000 level earlier this week. Australia’s S&P/ASX 200 XJO, -0.16% fell 0.2% and South Korea’s Kospi SEU, -0.08% fell 0.1%.

On Thursday, China’s largest stock broker, Citic Securities Co. 600030, -10.01% said it would cooperate with the country’s stock regulator in an investigation of the firm for suspected violation of securities rules. Guosen Securities 002736, -9.99% , China’s third-largest broker by assets, said it is under investigation for suspected violations, too, according to a company filing.

Analysts say officials’ moves aim to drain leverage and speculation from the market. Investors who borrowed heavily to buy shares fed a yearlong rally through June, though the unwinding of those loans also accelerated losses over the summer.