China’s stock market regulator on Sunday launched an investigation into alleged stock manipulation of some publically traded companies and vowed to crack down on illegal activities to protect investors’ interests, amid growing controversies about stock manipulation.
The China Security Regulatory Commission (CSRC) announced that it has started an investigation into the alleged manipulation of stock prices of firms, including Jiangsu Lettall Electronics Co and ZOY Home Furnishing Corp, by relevant accounts, in response to media reports of suspected manipulation.
In a statement, the CSRC said that it would adopt a “zero tolerance” policy toward vicious market manipulation activities and conduct thorough investigations and punish violators severely.
The announcement came after Yan Qingmin, vice chairman of the CSRC, said earlier that the agency will speed up the establishment of a legal framework to protect investors, and it will continue to encourage companies to reward investors through cash dividends and stock buyback programs.
The A-share market has more than 180 million investors, of whom the majority is individual investors. It is crucial to protect broad investors’ interests, Yan said.
Controversies around share price manipulation are rising on China’s twitter-like social media platform Sina Weibo. Ye Fei, a manager of a private equity fund, revealed on May 9 that stock price manipulation by listed companies has taking place under the guise of “valuation management”.
Ye alleged that at least 18 listed companies had been involved in price manipulation, including ZOY Home Furnishing Corp and Visionox, a display manufacturer.
According to Ye, the prices of some listed companies’ shares can be driven as much as 30 percent higher through secret manipulation schemes involving the companies, private equity funds and even public common funds.
On Friday, the spokesperson of the CSRC said in an online statement that the commission had taken notice of Ye’s revelation, and it has ordered involved companies to provide related information.
“We are upholding a zero-tolerance approach to market irregularities like manipulation and insider trading,” the CSRC statement said. “We will get to the bottom of the reported illegal behavior and publish the results accordingly.”
Companies that are involved in price manipulation tend to have lower valuations and smaller transaction volumes, according to Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology. However, manipulation can play havoc with the market if large fund companies are involved, he added.
“Price manipulation is a serious infringement of investors’ interests, and is the bottom line of the market regulator,” Dong said, “Regulations have been toughening up in recent years, and the authorities will crush any behavior such as this once it is exposed.”
File photo shows the entrance of the China Securities Regulatory Commission (CSRC) in Beijing, capital of China. (Photo:Xinhua)
