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Hang Seng Index

Why a city is hooked on word-of-mouth trading

3-MIN READ3-MIN
Nick Westra

Psst! Have we got a sweet stock tip for you

Mr Cheung, a retiree, thought he had a sure-fire investment bet the other day and was quick to pass it on.

'My broker said this company's major shareholders have sold out their stakes, and the new major shareholder is the wife of the grandson of a former Chinese general,' Cheung excitedly told mates. 'The company is going to do something big.'

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Stories like this are common in Hong Kong, where everyone from the business executive to the man on the street seems to have something to say about the markets.

'Hong Kong is a very speculative city,' says Tao Lin, an assistant professor in the faculty of business and economics at the University of Hong Kong. 'Due to the physical size of the city and the close social webs, it is easier to pass success stories to one another, leading to greater price bubbles.'

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During last year's bull market, these success stories carried an implicit belief that whoever heard them had an opportunity to cash in.

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