* Aged-care stocks plumb record lows after inquiry announced
* Sector already subject to crackdown amid reports of elder abuse
* Market fears worse to come
* Few details around timing, scope of inquiry (Adds quotes, political context, background)
SYDNEY, Sept 17 (Reuters) - Shares in Australia's largest listed aged-care operators plunged to record lows on Monday after the government said it would set up a powerful public inquiry to investigate abuse and mistreatment in the sector.
The Royal Commission will be similar to one that has wiped billions of dollars off the value of Australia's biggest financial firms since it was constituted late last year to examine wrongdoing in that sector. A$20 billion ($14.3 billion) aged-care industry has long attracted headlines of predatory pricing, assaults on patients and poor standards of care, and investors are bracing for more bad news after the government's announcement on Sunday.
"I don't think it was that widely anticipated that they'd go down this path," said Scott Power, a senior healthcare analyst at Brisbane-based stockbroker Morgans.
"There will be a negative sentiment over the sector for a considerable period of time," he said, referring to the likelihood of stricter regulation and higher costs that have also driven down bank shares amid the finance-sector inquiry.
Japara Healthcare Ltd JHC.AX and Regis Healthcare Ltd REG.AX both fell more than 14 percent to record lows, while Estia Health Ltd EHE.AX sank nearly 17 percent and Aveo Group AOG.AX fell 6 percent in the selldown. The broader Australian market .AXJO rose 0.4 percent.
Estia, Regis and Aveo welcomed the inquiry. Japara did not respond to a request for comment.
Investing in aged-care operators is viewed by analysts as a means to profit from Australia's ageing population and generous subsidies.
But the sector is already in the midst of a crackdown prompted by revelations a year ago of dementia patients being bound in restraints, overdosed on medication and suffering neglect at a since-closed home in South Australia.
Prime Minister Scott Morrison gave few details about the exact scope or timing of the inquiry, but warned the public on Sunday to prepare for "some pretty bruising information" to come out of the hearings.
It is the first major health-related initiative Morrison has unveiled since becoming prime minister in the wake of his predecessor Malcolm Turnbull's resignation from parliament last month. treasurer in 2016 Morrison tightened aged-care funding, a move that could come back to haunt him if the inquiry points to a lack of government support or weak regulation. The Liberal-led conservative government is struggling in the polls ahead of an election due by May.
But Paul Williams, a political scientist at Griffith University, said the inquiry would likely burnish Morrison's image as a caring leader.
"It's clearly done with an eye of not just good policy, but an eye to re-election," he told Reuters by phone from Brisbane.
($1 = 1.3988 Australian dollars)