Hong Kong Urges Investor Caution As Half-Year End Approaches

by Carla Johnson, Investors Offshore.com

26 June 2008

The Hong Kong Securities and Futures Commission (SFC) and Hong Kong Exchanges and Clearing Limited (HKEx) have warned Exchange Participants and investors of possible increases in trading activities and the risk of unusual price movements around month-ends, quarter ends, and half-year ends, such as 30th June 2008.

In an announcement earlier this week, the SFC and HKEx stated that they are aware of possible increases in trading activities and unusual price movements around the close at these times as well as during index rebalancing events and expiration of derivatives contracts. They urged Exchange Participants and investors to be mindful of these market events when making investment decisions.

In light of share price movements during the closing auction session at HKEx on 30th May 2008, the SFC has conducted a thorough review with over 100 inquiries into the trading activities. The SFC is continuing to follow up a number of responses with more questions to both local and overseas investors who participated in the closing auction session.

The SFC added that, given the widespread public interest in ensuring fairness and transparency in the market, it will conduct another review of the closing auction session on 30th June 2008 - the half-year end of 2008.

The SFC intends to take "appropriate enforcement action" where misconduct is detected.

In the 2007-2008 financial year, the SFC laid a record number of 190 trading charges, including 111 charges of market manipulation, 67 charges of illegal short selling and 12 insider dealing charges.

The SFC has completed 7 manipulation cases involving defendants for closing price manipulation. In 6 of those cases, the court imposed suspended jail terms of up to 4 months imprisonment. The seventh case was a disciplinary case against two brokers who facilitated a manipulation of the closing price.

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