With the development of the Chinese economy, investment consulting has become an increasingly popular area in China. Consulting firms provide crash courses on stock market manipulators – how to anticipate their targets, how to spot their trades and, most importantly, how to profit by following in their tracks – and that all require greater regulation.
With the development of the Chinese economy, investment consulting has become an increasingly popular area in China. Nowadays, almost every consulting firm provides crash courses on stock market manipulators: how to anticipate their targets, how to spot their trades and, most importantly, how to profit by following in their tracks.
A recent article by Bloomberg News claims that while manipulation cases in developed countries like the US often revolve around penny stocks with tiny market values, Chinese authorities last year punished traders for targeting multibillion dollar companies. Professor Gan Jie, the Director of the Center for Finance and Economic Growth at CKGSB, comments that China’s market is particularly vulnerable to stock manipulation because it has so many unsophisticated investors. Individuals account for more than 80 percent of trading on mainland exchanges, while one university survey showed that more than two-thirds of the nation’s new investors at the end of 2014 hadn’t received a high-school level education.
Investors in China tend to believe that following the market manipulators can provide them more chances to enjoy the “meat”, while the fact is that it’s possible for them to enjoy some soup if they move fast enough, but they can never truly enjoy the meat in the end.
In response to problems appearing in the Chinese stock market, the CSRC has teams at branches across the country who monitor for signs of misconduct. The latest data show 31 investigations in the first half of 2015, versus 15 for all of 2014 and eight in 2013. In October 2015, regulators said they had prosecuted 12 market manipulation cases with fines and confiscated gains totaling 2 billion yuan. The article by Bloomberg News quotes Professor Gan Jie on the regulation of China’s stock markets:
“The regulatory focus on manipulation is a long overdue policy measure. This isn’t the first time authorities have tried to crack down, but in terms of scale it is large. This is good for the stock market.”
Marketing manipulation in China is widespread in part because the market is still in its early stages of development. In an under developed market, stocks backed by major players and manipulators tend to perform much stronger. As a result, despite the regulatory crackdown, market manipulation is bound to continue.
To read the original article by Bloomberg News, please click here.