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* Report says Chinese authorities investigating shops inShanghai
* Hong Kong-listed shares of jewellery companies slide
* Probe would mark latest business sector to come underscrutiny (Adds company statement)
By Yimou Lee and Twinnie Siu
HONG KONG, July 19 (Reuters) - Chow Tai Fook Jewellery GroupLtd, the world's biggest jewellery retailer by marketvalue, is among a number of gold shops being investigated forprice fixing, the online edition of the official People's Dailynewspaper reported.
An investigation would mark the latest sector to come underscrutiny in China as authorities also look into companies in theinfant formula milk and pharmaceutical industries.
Shares of Hong Kong-based Chow Tai Fook and other jewellerystores named in the report, including Chow Sang SangInternational Holdings Ltd, fell on the report.
In a statement posted on its website late on Friday, ChowTai Fook said it follows "its own gold pricing mechanism, and isnot subject to the constraints or restrictions of anyassociation or other jewellery retailers."
The People's Daily, citing unidentified sources, saidChina's National Development and Reform Commission was probingprice manipulation by some jewellery shops in the commercialcapital of Shanghai.
The online report, which was later reposted on a governmentwebsite, said several shops had admitted to authorities thatthey colluded on prices.
A spokeswoman for Chow Sang Sang, which has a market valueof $1.5 billion, told Reuters it did not know why it had beennamed in the report. "We don't understand why we got involved inthe story," spokeswoman Cathy Tam said.
"We set the gold price every day based on the New Yorkmarket close. The gold price is the same within the whole regionof China and we don't have district differences."
Chow Tai Fook has a market value of $11.9 billion. Itsmainland China revenue reached HK$30.3 billion ($3.9 billion) inthe year ended March 31, representing more than half of itstotal business. Eighty percent of its China business wascharacterised as retail.
Shanghai-based jewellery retailer Lao Feng Xiang, which was also named in the report, could notimmediately be reached for comment.
CORPORATE SCRUTINY EXPANDS
The report came days after Chinese authorities accusedBritain's top drug maker, GlaxoSmithKline, of bribingofficials and doctors to boost sales and raise medicine pricesthere, while Belgian drug maker UCB said on Thursday ithad also been visited by officials.
Pricing in the infant milk formula business is also underscrutiny and a number of international milk powder producersrecently cut prices in China after the country's top economicplanning agency said it was investigating possible price-fixingand anti-competitive behaviour.
Shares in Chow Tai Fook fell as much as 6 percent on Friday,while Chow Sang Sang shed as much as 5 percent.
Shares of firms not named in the report also fell, withEmperor Jewellery & Watch tumbling around 5 percentand Luk Fook Holdings (International) Ltd falling asmuch as 5 percent. The benchmark Hang Seng Index was flatin late afternoon trade.
Some analysts said pricing in the gold sector was generallytransparent and it would be hard to fix prices.
"Gold products are priced by weight and prices are difficultto manipulate because everyone knows the market and the pricesare very transparent. Also, if they mark up prices by too muchin Shanghai, consumers will buy their products elsewhere," saidSteve Chow, an analyst at Sunwah Kingsway Research.
Gold posted a record quarterly fall from April toJune, luring mainland Chinese buyers to Chow Tai Fook's almost1,800 jewellery and gold stores across China, Hong Kong andMacau.
Industry sources said it was market practice for majorjewellers to agree on a daily price benchmark for gold via thejewellery association and Chow Tai Fook might have been found tohave colluded with other players during this process.
The daily benchmark rates set by the association for goldproducts are between 13 and 15 percent higher than internationalgold prices to account for processing and craftsmanshipfees.
Chow Tai Fook earlier this month reported a 63 percent spikein first-quarter revenue, with sales of gold products from itsown stores soaring 78 percent in the quarter ended June 30.
($1 = 7.7580 Hong Kong dollars) (Additional reporting Lavinia Mo, Matthew Miller and NishantKumar in Hong Kong and Fayen Wong in Shanghai; Editing by ChrisGallagher and David Holmes)
