A two-day rally in Next Digital’s shares has receded as quickly as it rose, much like the metaphor “be water” that guided Hong Kong’s anti-government protests, leaving the city’s financial regulators to deal with volatility driven by highly motivated participants in the age of social media. Shares of Next Digital, the parent company of Hong Kong newspaper Apple Daily , plunged 41 per cent to HK$0.65 on Wednesday, after shooting up by as much as 58 per cent in early trading. The pullback came after it skyrocketed 12 times over Monday and Tuesday . Investors rushed to exit the stock after the Securities and Futures Commission (SFC) issued a warning about the risks of trading the stock, while momentum slowed as calls on social-media platforms such as LIHKG about buying the stock as a way of supporting founder Jimmy Lai Chee-ying, who was arrested under the new national security law, waned. “Investors should be aware that by buying shares in the market, they are not supporting the company, they are supporting those who are selling,” according to a blog on the website of Hong Kong’s gadfly activist investor David Webb, that reproduced the SFC’s August 11 statement. Webb, who owned 4.9 per cent of Next Digital shares as of June 2018 according to exchange filings, could not be reached to comment if he was still a shareholder. The roller-coaster ride in Next Digital’s stock price left many retail investors who bought at high price levels ruing huge losses, and highlighted the challenges regulators face in an age where public sentiment can be easily swayed through social-media posts. “Those without regulatory qualifications calling on the public to buy a certain stock could be sued for the losses investors generated in the end,” said Angela Ho, lawyer and founder of law firm Angela Ho & Associates, which specialises in capital markets practices. Arrest of tycoon Jimmy Lai sparks surge in his company’s shares Social-media posts that contain assertions such as “the stock will definitely rise”, or mention specific price targets, but do not warn about potential risks of trading, can be held legally accountable, she said. But it could be very hard to track them down, given most people’s identities are anonymous online, and it would require internet companies’ cooperation to obtain such information, she added. “There is not much the SFC can do, except warning investors to beware of the high risks of trading stocks that have fluctuated significantly,” said Clement Chan, a non-executive director of the commission and managing partner of accounting firm BDO. He declined to comment on individual cases, but said under the Securities and Futures Ordinance, the commission can take action if it finds there was manipulation behind a trade. He added that he did not think current laws contained loopholes. If all trading is done in a fair and open fashion, “there is not much the SFC can do, as Hong Kong is a free market. The SFC cannot suspend trading of a company unless it finds evidence of alleged malpractice”, Chan said. The SFC has, however, over the past two days been in touch with stockbrokers who traded the stock on behalf of clients, Tom Chan Pak-lam, chairman of industry body Hong Kong Institute of Securities Dealers, said. “The commission has asked for the details of those who were selling and buying Next Digital shares. It is not unusual for a regulator to check the details of transactions” if an unusual share price movement has occurred, he said. Apply Daily publisher Next Digital reports wider full-year loss of US$53 million The current securities law already empowers the SFC to investigate anyone who releases fake news about a company with the intention of creating a false market and earning a profit from it, according to Kenneth Leung, a lawmaker for the accountancy sector. “The SFC will check if there was any malpractice or manipulation behind trading in Next Digital shares,” Leung said. “I do not think the incident reflects any loopholes in the Hong Kong securities regulation, because if someone calls for people to buy a stock due to political concerns, it is not an investment advisory. People who want to follow such calls are not making a false market, but they just want to show their political stance.” A lawyer who declined to be named said the SFC can check for market manipulation under current laws. And if the regulations are tightened further to ban people from giving their views on social media about stocks, it will affect Hong Kong’s free market credentials.