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[quote=APAULT,282968]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
[/quote]

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