Hong Kong says social media used in 20% of its stock manipulation cases

Hong Kong's financial markets watchdog said on Thursday that about 20 per cent of the market manipulation schemes it is currently investigating are so-called "ramp and dump scams" conducted via social media.

The targets of such scams are local retail investors who account for roughly 10 per cent of Hong Kong-listed shares' trading value, according to exchange data, a relatively high proportion compared to other markets.

Many small cap stocks in Hong Kong are little traded and prone to wild price swings and sudden crashes. The Securities and Futures Commission (SFC), has, in recent years, tried to take a more active role in policing the market.

In the 12 months to end March 2020 it investigated 478 cases of market misconduct, mostly alleged market manipulation or insider dealing.

In a ramp and dump scheme, fraudsters typically purchase a significant portion of shares in a small company with low liquidity, driving up the price.

They then use social media platforms like Facebook, WhatsApp and WeChat to spread favourable, normally false news about the company, sometimes posing as investment experts, drawing more buyers in and allowing the fraudsters to offload their shares.

Remaining shares are then dumped, causing the price to collapse.

"To avoid falling victim to these scams, the public must be vigilant when offered unsolicited investment advice or tips on social media," SFC chief executive Ashley Alderin said in a statement.