EVERY MONTH AS the Hang Seng Index futures contracts head towards expiry, local brokers and retail investors begin looking for signs of market manipulation by the big international houses.
In newspaper reports, on radio shows, in research reports and on Hong Kong's lively rumour mill are comments such as: 'The big boys are trying to push up the market.'
Or, as a broker said recently: 'Before the end of the month, before futures expire they [the international houses] try to keep it at certain levels either up or down.'
The problem is that it is illegal to push a market up, or down for that matter. You can take big bets on which direction you believe the market will move, but manipulating share prices is against the law.
Is Hong Kong's stock market the private playground of the big international houses, which manipulate it at will? Or is this just a market myth?
Brokers at all the big international houses, including Goldman Sachs and Morgan Stanley, scoff at notions that they regularly engage in manipulation, arguing that both the market and the regulatory risks are too large.
They also say there is little logic to the accusations. You cannot push up the value of a futures contract without purchasing the contracts or their underlying stock, which incurs risk. And, traders say, if they artificially inflated the contract, the risk is greater they will be left holding the bag.
