Jake's View | Beijing’s list of ‘malicious short-selling practices’ doesn’t ring true

… illegal practices such as spreading rumours to induce panic selling, taking advantage of inside information to dump shares before others, colluding with other institutions in bulk share sell-offs to send down prices and churning – selling and buying the same shares at affiliated accounts to rig prices.

SCMP, July 13

I can’t say that these sorts of things never happen on the Shanghai stock market. In matters of finance Shanghai is a bit of a cowboy town. But it still just doesn’t ring true. Let’s take these so-called “practices” one by one:

Spreading rumours to induce panic selling – One thing you quickly learn in close contact with a market is to pay more attention to rumours than to official pronouncements. It is rare that a rumour does not contain a solid kernel of truth.

This is because markets are good at sifting rumours. Unlikely stories simply do not travel far. People do not pass them on and then they simply die to no effect.