SYDNEY, Jan 18 (Reuters) - The opening of a year-long inquiry...

SYDNEY, Jan 18 (Reuters) - The opening of a year-long inquiry into Australia's aged-care industry on Friday triggered falls in the share prices of nursing-home operators as investors braced for tighter regulation and a possible sector shakeout.

Aveo Group (AOG) fell nearly 2 percent, Japara Healthcare Ltd (JHC) slumped nearly 3 percent, and Regis Healthcare Ltd (REG) was almost 1 percent weaker, underperforming the broader market (xjo) which hit a two-month high.

"There is a lot of doom and groom around the market. There has already been a lot of horror stories in the media. There is all downside risk here," said Julie Lee, an equities analyst at Bell Direct.

The falls extend losses suffered by Australia's aged-care providers since the semi-judicial independent inquiry was called by Prime Minister Scott Morrison late last year following a series of abuse scandals at nursing homes.

The opening day of the inquiry was largely procedural, however analysts expect subsequent hearings to expose failings which will force the government to impose costly additional regulation on the A$20 billion ($14 billion) industry.

"Frail and elderly members of our community deserve to, and should, be looked after in the best possible way and we intend to do our best to see that happens," Commissioner Richard Tracey, a former Federal Court judge, told the hearing in Adelaide.

Public pressure for an inquiry began in 2017 after media reported dementia patients were being bound in restraints, overdosed on medication and neglected at a since-closed home for the elderly in South Australia.

The inquiry comes hot on the heels of a Royal Commission into the financial sector that exposed widespread wrongdoing and crimped profits at Australia's major banks.