Man Who Called Out Hong Kong Small-Cap Stocks Mystified By Plunge In Hong Kong Small-Cap Stocks

Maybe it was the poor oversight by regulators. Who's to say, really?
Author:
Updated:
Original:
Maybe it had something to do with these. By WiNG (Own work) [GFDL, CC-BY-SA-3.0 or CC BY-SA 2.5-2.0-1.0], via Wikimedia Commons

Maybe it had something to do with these. By WiNG (Own work) [GFDL, CC-BY-SA-3.0 or CC BY-SA 2.5-2.0-1.0], via Wikimedia Commons

Last month, a rabble-rouser named David Webb singled out 50 stocks listed in Hong Kong as being, well, a little fishy. Webb’s sleuthing had revealed a complex network of cross-ownership of each other’s shares, all of which fell on deaf ears. Until this week, however, when some of those companies lost in excess of 90% of their value and Hong Kong’s Growth Enterprise Market Index plunged more than 10%. At least, that might be what happened. Webb’s not really sure. And neither is anyone else.

Market participants remain stumped over what, or who, triggered the declines of as much as 90% for a number of stocks listed on Hong Kong’s Growth and Enterprise Market, home to a plethora of so-called penny-stocks that trade for less than one Hong Kong dollar ($0.13) each.

That includes the man who last month raised questions about the network of cross-shareholdings that appears to link the firms which were part of the plunge….

Mr. Webb said the unexplained plunge in the GEM market was indicative of poor oversight of markets by the city’s authorities, including exchange operator Hong Kong Exchanges & Clearing Ltd., known as HKEx, which owns the market….

Some market participants said rumors of tighter regulation over the GEM market may have sparked its dive this week….

Others said the sudden drop could have been exacerbated by the close links between the companies involved, with some being forced to sell their holdings in others as prices dropped.

Hong Kong Stocks Suffer Enigmatic Plunge As Major Anniversary Looms [WSJ]

Related

New York, London, Hong Kong… Moscow?

Russia may have the kind of official corruption that would make a Sicilian blush, a fairly weak grasp on the rule of law, a pair of would-be czars trading its top two political posts and, now, more orphans than it can give away. It also may have a stock exchange worth as much as the big one with the columns down on Broad Street.