Hong Kong's SFC vows to crack down on market manipulation amid rally

Securities and Futures Commission chairman Carlson Tong Ka-shing has vowed to crack down on potential market manipulation after several small plays exhibited very unusual share price movements in the recent market rally.

Tong said the regulator had a team focused on monitoring unusual share price movements.

"The SFC will follow up on any unusual share movement," he said yesterday. "Investors should feel confident that the SFC will regulate the market and protect investors' interests.

"Hong Kong is an open market and it is natural to have a lot of market volatility in light of recent capital inflows. Free markets like those in the US and Europe also have high volatility from time to time."

Hong Kong brokers say the local market, and particularly small plays, became more volatile after the stock rally began on April 8, right after Beijing allowed mainland mutual funds to invest in the local market via the Shanghai-Hong Kong Stock Connect scheme.

The benchmark Hang Seng Index hit a seven-year high last month before dropping back this week, while small plays rocketed higher this week. Infinity Financial jumped 50 per cent yesterday while GEM-listed software firm Pizu rose 40 per cent.

Rogue trader Nick Leeson warned in Hong Kong on Monday that the surge in trading volume and rapid pace of regulatory change surrounding the stock connect scheme had created conditions ripe for market manipulation.