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Is this market manipulation, and is it illegal?

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  1. #1

    Is this market manipulation, and is it illegal?

    I have been buying shares of a medium-sized HK company before and during the current "slight adjustment".

    One thing that I didn't really understand was why the share value of this company didn't drop as much as that of other companies. Today I checked the volume of transactions during the last few days, and I noticed something very peculiar: Thursday, Friday, Monday and Tuesday (i.e. the last four days, I only have data for the last 5 days) someone bought 2,000 shares (the smallest possible amount) for about 3.5% more than the previous price, about 5 minutes before the market closure, thus bringing up the closing price by 3.5%.

    This can't possibly be done by a wise investor, since the price of the 2,000 shares would have been about HK$950, and the costs (HK$150 or so) would make this purchase totally silly. It's obviously done to bring up the price, and prevent it from sliding further (it almost didn't drop at all from May 6).

    I wonder under what conditions this is illegal. Of course one can decide to make very silly decisions as to how to invest one's money, but I believe that market manipulation is sometimes illegal. What do you people think?

    Maybe this is actually relatively common?


  2. #2

    Join Date
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    While I am surprised, on the other hand I think that the Hong Kong Stock Exchange is unreliable and inherently flawed due to the lax laws. Market manipulation is illegal, but it is not easy to prove.

    To you regularly view the website by David Webb? If you don't, you should, as it is compulsory reading:
    Webb-site.com - non-profit commentary and database on governance in Hong Kong

    Only last week was there a conviction for a similar problem you are describing:
    Former Sun Hung Kai's account executive convicted of market manipulation

    Tell us the stock you are trading in.


  3. #3

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    David Webb would definitely give you more insight and you can email him through the site.

    On the point of manipulation the answer has to be yes in a small font and I can remember some articles on it a short time back. Though the articles where about changes being brought about by " acceptable " insider trading, supposedly amongst friends of friends of friends. If you look at most local held stocks I.E. not the likes of the major corporates but more like the B list, here you can see pre positioning to the later reaction of the public information ( normally one or two days ). I even posted on here about it some time ago.

    Though yours is different in activity I would propose the mindset here is very much " so what " and " If I make money or save money its good, if I lose money its not my fault and I want it back ". There is no understanding in the public psyche of anything more complex.


  4. #4

    Smells like classic "marking the close" to me, which is illegal EVERYTIME.

    The SFC should have picked it up (what with all their talk about increased manpower for market surveillance), but it probably has slipped their attention. If you are so minded you should contact the SFC about it.


  5. #5

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    I agree it does sound suspicious and no harm to drop David Webb or the SFC a line and point it out to them.


  6. #6

    Thanks.

    The only problem is that I bought quite a bunch of shares of this stock. So if the word goes out that someone is manipulating that stock, it will probably drop in value? I like this stock, I made some money in the past, I expect its value to grow by 20% when the market recovers, and it has a dividend above 4%.

    If I write to the SFC, I hope they will take some time to investigate, right?


  7. #7

    Well, as the good citizen that I am, I wrote to the SFC to ask whether they want to investigate.


  8. #8

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    Which stock?


  9. #9

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    Definitely not illegal as it is one freaking trade at a small volume. Not one designed to shake the weak hands from the tree to get cheap shares before the next run up. They do that in the market.

    There is no law governing stupidity in buying too high or setting a bid and then upping it just to get a position. 2000 shares are not going to move a market and painting the tape if that is what someone tried to do at the lose makes no sense in that context.

    You might need a bit of course first before you venture too far into the market.

    I trade only online in North America.
    Stocks on the Toronto Venture Exchange are heading up and down all the time as that is a negotiated exchange where people with large positions can and do drive up and down the price.

    If the market is being driven up, join them and sell enough into the rise that you get back your capital and hold on to your core position if you believe in the value of the company and it meet your investment criteria.

    If a company is low on cash and needs a private placement but wants it at a higher price, how do you think they get it? They start buying including the insiders or their friends so that the price rises to where they want to do a financing and ergo a private placement. Of course the buyers in the run up often are those in the PP or what are friends for.

    If not understanding the game move your money to cash and a safer investment vehicle.

    Last edited by Football16; 01-06-2010 at 12:38 PM.

  10. #10

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    I meant painting the tape at the close not lose.. can't now edit it.


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