|
Article
from the
South China Morning Post
Thursday August 20 1998
Yam rejects accusations of creating
false market through manipulation
ENOCH YIU
The Government has forcefully rejected criticism it illegally
manipulated the Hang Seng Index and created a false market by
driving up share prices 15 per cent in the last three trading
days.
Private-investor David Webb - who previously held senior
positions at institutions in Hong Kong including Wheelock Capital
- has argued the Government may have breached securities
regulations by intervening in the market.
He drew attention to Section 135 of the Securities Ordinance,
which states "a person shall not intentionally create . . .
a false market in respect of any securities on the Unified
Exchange".
"A false market is created in relation to securities when
the market price of those securities is raised or depressed or
pegged or stabilised by means of . . . any act which has the
effect of preventing or inhibiting the free negotiation of market
prices for the purchase or sale of the securities."
In a letter in today's Business Post, Mr Webb said: "The
Government should consider whether it is breaching Section 135 by
seeking to raise the price of securities in the market as a whole
and/or to stabilise them by standing in the market.
"It is one thing to buy stocks because you think they are
good value and quite another to do it if your stated and
deliberate aim is to raise prices to 'hit them [hedge funds]
where it hurts'.
"If the Government does not regard its action as market
manipulation, then they surely cannot accuse hedge funds of
creating a false market by acting in the opposite
direction."
Hong Kong Monetary Authority chief executive Joseph Yam
Chi-kwong said the Government's action was lawful and in no way
constituted manipulation.
"Only those who are spreading rumours or offering
misleading information should be regarded as creating a false
market," he said.
"We kept the public informed about the intervention on
Friday. How can this be regarded as making false market?"
In his letter, Mr Webb explained: "Ordinary investors who
invest in blue chips today bear the risk that they may be
acquiring shares at artificially high prices as a result of the
intervention.
"Ironically, the action (if it continues for too long)
may even impede the future recovery of stock prices as investors
will know that the Government has large positions to sell after
the intervention stops."
Sources close to the Securities and Futures Commission backed
the Government, saying recent action by both the hedge funds and
the Government was not illegal.
They said repeatedly trading certain shares in a small circle
of brokers in an attempt to give a false impression that the
stock is very popular would be regarded as making a false market.
Back To Top
|