I HAVE NOT had a good gnaw at the hand that feeds me for a long time but a description of penny stocks as a 'disgrace to the market' in one of our leaders yesterday (South China Morning Post, July 29) gives me my opportunity for a bite.
Why are they a disgrace, boss? I have gone through that leader several times and the only thing I could find to back up this disparagement of penny stocks was an assertion that they are 'prone to manipulation by those with the means to easy credit and the rumour mills'.
Let us draw a parallel here with the problem of road accidents. We have two courses of action we can take. We can either ban cars from Hong Kong's roads, and this would undoubtedly solve the problem, or we can pass laws against speeding.
Quite obviously, the first question to address is whether the problem lies with the car or the driver and we addressed this question long ago. Cars are legal. Speeding is illegal.
Similarly, with this problem of stock market manipulation we can either ban stocks, which would certainly stop the problem instantly, or we can pass laws against manipulation. We have first to decide whether the stock or the stock manipulator is the problem and this we have already done. Stocks are legal. Manipulation is illegal.
This makes such absolute and obvious sense that you may wonder why we have suddenly come to question it. Whence comes the rebirth of this strange notion that the problem lies in the stocks? I can suggest an answer to that question of course. It lies in the discovery that we may have made manipulation of stocks illegal but we have found this law difficult to enforce.