Stockmarket scams

Stockmarket scams
Apr 21, 2008 00:43
APAULT Points: Join Date: Mar 11, 2006 Status: offline	Last year I commented on the disgrace of floats like PetroChina which were grossly underpriced. Today I came across this article in the Sydney Morning Herald, a respected Australian newsaper with a strong business and finance section. Lin made his first A$100,000 from an insider trading racket at the age of 23. In the following two years he diversified to where the big money was: market manipulation and a Chinese market specialty called "front running". By 25 he had made his first million Australian dollars (A$). 'Front running’is a can't lose strategy where the managers of China's state-owned funds make a little personal profit ahead of the mums and dads who pay them to invest their money. Lin said a middle man would tell him to buy a certain company's shares before his investment fund as they will drive the price up. Then we sell a few days later and split the profit. Lin said he had recently given up the very illegal scam that made him rich, although his fund management friends still come offering their deals. Now, insiders have make money at the expense of ordinary outsiders. They sell a slice of a state-owned company "to the public" at a huge discount and make sure all the shares are safely in the hands of friends, business associates and useful government officials. They all make money when the price doubles on the first day. The best example is PetroChina, whose November 5 debut on the Shanghai stock exchange raised 67 billion yuan and was 50 times over-subscribed. Shares nearly tripled from the 16.70 yuan offer price to a peak of 48.62 yuan. And you can guess who had been allocated shares and made the profit. Who lost: the government, or if you prefer, the rest of China. I have presented a slightly edited version of the first half of the article which can be read in full at: http://business.smh.com.au/chinas-sharemarket-stability-goes-on-the-run/20080420-27e4.html?page=1

Apr 21, 2008 00:43

APAULT
Points:
Join Date: Mar 11, 2006
Status: offline

Last year I commented on the disgrace of floats like PetroChina which were grossly underpriced. Today I came across this article in the Sydney Morning Herald, a respected Australian newsaper with a strong business and finance section.

Lin made his first A$100,000 from an insider trading racket at the age of 23. In the following two years he diversified to where the big money was: market manipulation and a Chinese market specialty called "front running". By 25 he had made his first million Australian dollars (A$).

'Front running’is a can't lose strategy where the managers of China's state-owned funds make a little personal profit ahead of the mums and dads who pay them to invest their money.
Lin said a middle man would tell him to buy a certain company's shares before his investment fund as they will drive the price up. Then we sell a few days later and split the profit.

Lin said he had recently given up the very illegal scam that made him rich, although his fund management friends still come offering their deals.

Now, insiders have make money at the expense of ordinary outsiders. They sell a slice of a state-owned company "to the public" at a huge discount and make sure all the shares are safely in the hands of friends, business associates and useful government officials. They all make money when the price doubles on the first day.

The best example is PetroChina, whose November 5 debut on the Shanghai stock exchange raised 67 billion yuan and was 50 times over-subscribed. Shares nearly tripled from the 16.70 yuan offer price to a peak of 48.62 yuan. And you can guess who had been allocated shares and made the profit. Who lost: the government, or if you prefer, the rest of China.

I have presented a slightly edited version of the first half of the article which can be read in full at:
http://business.smh.com.au/chinas-sharemarket-stability-goes-on-the-run/20080420-27e4.html?page=1

Apr 21, 2008 01:02

JABAROOTOO
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Join Date: Jul 4, 2005
Status: Offline

Yes Paul,
It must be happening a lot here. I know friends have recently done very well on the 'stock market' and I was wondering just how much is really above board.
It is a real scandal that 'STATE' owed companies can be sold off to the very 'public' who are supposed to own them anyway for the benefit of a very few managers and cadre in positions of responsibility and trust.

Alas, this is our human nature rising it's ugly head whenever and wherever it can!

Apr 21, 2008 03:35

APAULT
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Join Date: Mar 11, 2006
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The article went on to point out that the market has risen 600% over the last few years so u can make money legally. But as other threads point out there is a bit of a bubble effect in the prices (in my view people have been paying too much but if they bought good quality companies and didn't borrow too much, they can hold on and will make money).

Of course there is an element of thescams in all countries, but the rules prevent them being such a big problem.

Apr 21, 2008 21:06

MARRIE
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Join Date: Jan 7, 2008
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Quotes(in my view people have been paying too much but if they bought good quality companies and didn't borrow too much, they can hold on and will make money))

Warren Buffett says If stock players are investors like himself, brokerage and backoffice will have no business.

Paul and Jab, insiders trading is one of the channels that high ranked officers in state-owned enterprises swallow or nibble away social wealth. Thanks for the posting.

Apr 21, 2008 22:32	#4
LEONARDO Points: Join Date: May 21, 2007 Status: Offline	Yes, insider trading is a big defect of Chinese stock market. The privileged class gains no matter how the whole economic landscape (the landscape of stock market) is. Ordinary outsiders are losers no matter how the whole landscape of stock market is. It seems that it doesn’t matter whether the market is bullish or bear. You are an inevitable loser as long as you are an amateur outsider.

May 3, 2008 20:09	#5
JARCHACK Points: Join Date: Apr 27, 2008 Status: Offline	The same thing happens on the New York Stock Exchange. Forget trading, do your homework and invest long term. The stock market is still the only asset class that won't get eaten up by inflation over the long haul.

May 3, 2008 22:40

MARRIE
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Join Date: Jan 7, 2008
Status: Offline

((Forget trading, do your homework and invest long term. The stock market is still the only asset class that won't get eaten up by inflation over the long haul. ))

Bombardier Comm. Share A has been raised by 250% roughly druing the last 13 years since 1995 and purchasing power lowered around by 30% assuming 2% per year in developed country. In order to sustain current living stardards, increasing financial assets or saving for retirement, It's a strategy of no strategy to invest by picking stocks with Beta around 1 or little bit above 1 (market average risk) and holding it for one or two decades. Certaily, realest is a better option.

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