Money Matters | Confessions of a market maker in Hong Kong’s penny stocks fiasco

The fiasco with Hong Kong’s penny stocks had been spreading like wildfire. How did it happen like this?

Let’s imagine I’m one of the professional traders whose magic flute has many penny stock investors astray, down the abyss to their personal misfortune.

But don’t blame me. I’m no different from the unsupervised child who finds the cookie jar open. I do what every kid does -- I gouge on cookies till I’m stuffed.

I work in a securities firm you see, but my boss is no ordinary broker. He’s a chong kar (莊家) – market maker. He “made” the stock price of the listed companies he controlled.

The trade craft is derived from ancient wisdom. First, make up some good news about a company. Then, the men on the right side of the room call in buy orders, while those on the left side sell them the stock, and vice versa.

The price goes up and up, until the mom-and-pop investors take notice and pile in. Next announce a massive rights issue to scare off the little shareholders, so shares can be picked up at dirt cheap prices. When the timing is right, do it all over again.