Advertisement
SFC
BusinessBanking & Finance

Hong Kong’s regulators are on alert for ‘pump and dump’ tactics via social media network, in a stock market with few brakes

  • Hong Kong police arrested 15 people on suspicion of conspiracy to defraud and money laundering by manipulating shares of Next Digital in August
  • 20 per cent of market manipulation cases in Hong Kong are related to social media scams, SFC says

Reading Time:4 minutes
Why you can trust SCMP
2
Exchange Square, where the Hong Kong stock exchange is located in Central, on June 2, 2020. Photo: Winson Wong
Enoch Yiu

Hong Kong’s financial regulators and market supervisors are closely monitoring the stock exchange for unusual price and volume movements to prevent market manipulation via social media, stepping up their vigilance in a market that mostly operates with few brakes on.

“We understand that the Securities and Futures Commission (SFC), as the regulator of the Hong Kong securities market, has taken [some] follow-up actions on the principle of safeguarding investor interest,” a spokesman for the Financial Services and the Treasury Bureau said in response to inquiry by the South China Morning Post.

The alert follows several weeks of frenzied trading in the US stock market, where armies of retail traders on zero-commission platforms such as Robinhood were egged on by chat groups on the Reddit social media network to buy shares of GameStop and AMC Entertainment Holdings, in defiance of short-sellers in the so-called “nerds vs Wall Street” battle. Shares of GameStop, a left-for-dead speciality games distributor, jumped almost 50-fold from last year’s average US$7 per share to a January 27 record of US$347.51 before crashing to US$90 over four trading days.
The price gyrations made many amateurs traders rich, but saddled more of them – late comers who bought the stock when it had already soared – with losses when prices came crashing. The battle, lionised around the world on social media as a David-versus-Goliath battle between Generation Z traders and Wall Street bankers, is showing signs of being followed elsewhere.
A person walks past a GameStop in the Manhattan borough of New York City, New York, on January 29, 2021. Photo: Reuters
A person walks past a GameStop in the Manhattan borough of New York City, New York, on January 29, 2021. Photo: Reuters

Shares of oversold gaming stocks in mainland China surged last week, while heavily short-sold stocks in Australia, including a company with GME as its ticker symbol, jumped by as much as 60 per cent, according to Bloomberg.

Advertisement