Detecting Frauds. When to Sell. Avoiding Value Traps.

 

Filter out noise and focus on information that are important for investing.

VALUE TRAPS

How do you decide whether it is a value trap or not?

Value traps are statistically very cheap and very alluring.

First question to ask:  “Why is God so kind on you that you are the only one who has this tremendous insight that this stock is cheap and all the other people who are very active, smart and intelligent in the market are ignoring this company?”

Is there an embedded growth optionality in the company? Can the company have a growth phase? Can the company come out with some new product offering which can introduce growth? 

This is a dynamic exercise.  You will need to revisit the hypothesis every now and again, at intervals. 

Two characteristics of value traps are:

• (1)  They typically don’t tend to grow more than the nominal GDP
• (2)  They cannot reinvest their cash flow.

So the question you should ask is what is the catalyst which will change this and allow them to reinvest the capital which they are throwing off?  In its absence, you have a classic example where the company had great cash flows and no catalyst.  

Your sole focus of whether to participate in a seemingly value trap could be you calling out the catalyst that will catapult it out of this situation.

Hidden hands behind penny stock surge (The Edge)

Special Report: Hidden hands behind penny stock surge 

The Edge Malaysia September 30, 2020

This article first appeared in The Edge Malaysia Weekly, on September 21, 2020 - September 27, 2020.

ASTUTE market observers would have noticed on the local bourse a group of individuals, supposedly acting in concert, who have amassed shares in more than 20 publicly traded companies. These companies — linked via shareholding and directorships — are often on the most actively traded list, with huge, fluctuating share prices. “It (the companies) is all linked to the same person; usually, the most actively traded list on a daily basis involves these counters,” one source says when asked which are the companies that are linked. 

However, research by The Edge (see chart on the 21 companies) indicates that while other businessmen have surfaced, the individual said to be in control of the group of companies is not officially onboard or present as a shareholder.   “This [his not surfacing] could be due to several issues,” another source adds. 

It is also telling that nine of the 21 companies mentioned — 

• AT Systemization Bhd, 
• MLabs Systems Bhd, 
• Focus Dynamics Group Bhd, 
• mTouche Technology Bhd, 
• Fintec Global Bhd, 
• XOX Bhd, 
• M3Technologies (Asia) Bhd and 
• NetX Holdings Bhd 

— have their principal place of business, head office, business office or corporate office in Menara Lien Hoe, near Tropicana Golf Country Resort in Petaling Jaya. 

On its website, Lambo Group Bhd states that its address is at Menara Lien Hoe, even though the address in its annual report is in Old Klang Road in Kuala Lumpur. 

In 2006, Lien Hoe Corp Bhd sold Lien Hoe Tower Sdn Bhd, which owns Menara Lien Hoe, to privately held E-Globalfocus Sdn Bhd for RM1 and the assumption of RM43 million in debts. Meanwhile, E-Globalfocus was 68%-controlled by Cubes Innovative Sdn Bhd, a company 99%-controlled by Chuah Hock Soon. 

Chuah and businessman Datuk Kenneth Vun @ Vun Yun Lun were charged with four others in July 2014 for allegedly manipulating DVM Technology Bhd shares in March 2006. 

Vun has had several issues with the Securities Commission Malaysia and, in 2009, had to restitute RM2.496 million — being the amount of company funds that he had caused to be misused for his personal benefit, according to the regulator — to his then flagship FTEC Resources Bhd. Since FTEC — which morphed into Tecasia Bhd and later Mangotone Bhd — was delisted, 

Vun has had little direct presence in the market. However, Vun’s two sisters, Carol Vun On Nei and Grace Vun Siaw Nei, hold stakes of 3.64% and 0.67% respectively in Xidelang Holdings Ltd. 

Fragmented shareholding 

While Fintec Global seems to be a prominent company at the centre of the maze, its shareholding is fragmented, with several blocks of shares parked under Sanston Financial Group Ltd. In several of the 21 companies on the list, Sanston Financial is present in the shareholding list. Other companies that surface as shareholders in these list of companies include Global Prime Partners Ltd and Cita Realiti Sdn Bhd, a private company wholly-owned by one Kamarudin Khalil. Other shareholders, albeit usually holding small stakes, among the 21 companies include Datuk Jacky Pang Chow Huat — who, apart from a 11.84% stake in Sanichi Technology Bhd — has small stakes in DGB Asia Bhd, Focus Dynamics, MNC Wireless Bhd and Xidelang. Pang is also a director in Sanichi Technology.

Meanwhile, businessman Mak Siew Wei has 23.4% in AT Systemization, 17.07% in Green Ocean Corp Bhd and small stakes in Focus Dynamics and Xidelang. He is also a director at AT Systemization, Green Ocean and Saudee Group Bhd. Datuk Eddie Chai Woon Chet recently acquired a 62.37% stake in restaurant operator Oversea Enterprise Bhd, and has a 6.71% shareholding in Anzo Holdings Bhd, where he is managing director and has a board position in M3Technologies (Asia). Another name frequently seen is Datuk Kua Khai Shyuan, who, besides a 5.9% stake in mTouche Technology, has small shareholdings in Focus Dynamics, PDZ Holdings Bhd and Sanichi Technology, and has board seats on Trive Property Bhd, DGB Asia and MNC Wireless. Former Umno treasurer and former Bank Simpanan Nasional Bhd chairman Datuk Abdul Azim Mohd Zabidi surfaces as a director in four of the companies — Fintec Global, DGB Asia, Anzo and XOX. 

Most of the companies are loss-making and small in terms of market capitalisation, with the exception of Focus Dynamics, which has a market value exceeding RM5 billion. Nevertheless, Focus Dynamics, which is involved in operating food and beverage outlets, seems to be the star performer, with its stock price hitting a multiple-year high of RM2.64 recently on Sept 17, despite mustering a meagre RM3.08 million in net profit from RM20.72 million in revenue for its six months ended June this year. Year to date, Focus Dynamics stock has gained about 400%. 

Irrational exuberance 

Trading volume on most of the 21 companies is generally high, and many have shown unexplainable strong gains over the past few months. 

• For instance, Saudee’s stock hit a low of eight sen on March 17, and picked up momentum in June to hit a 52-week high of 67 sen on Aug 13, gaining more than 300%. For its nine months ended April this year, Saudee, whose mainstay is in frozen food and poultry, suffered a net loss of RM27.78 million from RM57.61 million in revenue. Last Friday, Saudee closed at 48 sen, translating into a market capitalisation of RM77.3 million. 
• If you are impressed with Saudee’s gains, Anzo — a loss-making company that has a business in timber products — gained more than 1,000% from mid-May to hit a high of 26 sen in July. Anzo closed at 11.5 sen last Friday, giving it a market capitalization of RM102.7 million. 

There are several companies on the list that have shown similar patterns. 

• XOX, which is involved in cellular telecommunication services, gained more than 430% from mid-July to hit a high of 39.5 sen at end-August. In mid-March this year, XOX was trading at one sen. The stock closed last Friday at 19.5 sen, translating into a market value of RM562.8 million.
• Ailing shipping company PDZ’s stock was trading at one sen in mid-March, but at end-June, it gained more than 500% to 32.5 sen in mid-July. For a company mired in law suits and a significant dearth of shipping assets, PDZ’s meteoric rise is surprising to many. PDZ ended last Friday at 10 sen, giving it a value of RM89.4 million. 
• Similarly, Sanichi Technology, which is in precision moulding, saw a sudden surge in trading volume at end-May, with its stock spiking more than 150% to hit a high of 12.5 sen on June 2, after which it tapered off. 

While the peaks may be enticing to punters, the change in fortune, with counters falling to their troughs, can be a deterrent. 

• mTouche Technology, which has a wireless network and mobile messaging business, saw its stock crash from a high of 20.5 sen on Feb 20 this year to a low of 5.5 sen on May 12. 
• DGB Asia, a tracking solutions company, was trading at 19.5 sen in the early part of November last year, but by mid-March, it had shed most of its value to close at 1.5 sen on March 19. 

It is also noteworthy that companies such as Water Beaute World Bhd and WBW Global Sdn Bhd, have 1.02% and 0.42% respectively in Trive Property. These two companies were involved in get-rich-quick and fake online investment schemes. Both these companies were reported in the past to have stakes in XOX, while WBW Global also had a substantial stake in Anzo Holdings.

https://www.theedgemarkets.com/article/special-report-hidden-hands-behind-penny-stock-surge?type=malaysia

Comment:

Fine piece of investigative financial investigation and journalism.  Thanks to Edge.

Securities Commission Malaysia - 82pc offences involve insider trading, mart manipulation

13 March 2014

82pc offences involve insider trading, mart manipulation

KUALA LUMPUR: The Securities Commission Malaysia (SC) said 82 per cent of its 56 active investigations involved suspected insider trading and market manipulation offences.

The rest of the investigation cases comprised of securities fraud, intermediaries misconduct, unlicensed activities and matters of corporate governance.

A total of 16 referrals were received from sources like market surveillance and investor affairs and complaints departments and other regulatory bodies.

SC said a majority of the whistle-blowing cases - 75 per cent - were attributed to suspicious trading activities like market manipulation and insider trading.

Breaches in corporate governance practices and illegal conduct of regulated activities also figured in the referrals that the SC received, it said in its 2013 annual report released yesterday.

The SC's various enforcement measures in 2013 had resulted in 34 criminal charges filed against six individuals and five against directors in public-listed companies, for offences relating to false financial reporting.

It also filed a civil suit in the High Court against a former licensed asset management company to claim RM13.3 million for losses caused to 63 investors. Regulatory settlements from this case amounted to over RM2.7 million, with steps taken to provide restitution to impacted investors.

The body also imposed four administrative sanctions on licensed intermediaries and as a bond trustee for their failure to comply with regulatory obligations.

A total of RM1.35 million in penalties were collected through such actions and 70 infringement notices were issued for other various breaches of securities laws and guidelines.

The SC used its investigation powers to obtain evidence from various sources like professional companies, financial institutions, public-listed and private companies, regulated entities, investors and various individuals. Oral evidence was gathered as formal recordings of statements from witnesses.

Last year, 246 witnesses' statements were recorded and these individuals comprised of professionals, advisers, company directors, senior management teams from listed companies as well as licensed persons.

As the trend in cross-border transactions is becoming common in many of the SC's investigations, the SC continues to cooperate with its foreign supervisory counterparts through the IOSCO's multilateral memoranda of understanding on consultation and co-operation and exchange of information.

In this regard, the SC made 24 requests to seek assistance from seven foreign jurisdiction to obtain evidence. The places include China, Hong Kong, British Virgin Islands, Singapore, Switzerland, United Kingdom and the United States.

On the other hand, the SC received 11 requests for assistance from foreign supervisory authorities of seven jurisdictions.

http://www.nst.com.my/business/nation/82pc-offences-involve-insider-trading-mart-manipulation-1.509938

Spotting Sharks Among Penny Stocks

October 30 2012

For every publicly traded corporations with market capitalization in the hundreds of millions and billions, there are thousands of smaller companies with much more modest market caps. Because these companies have smaller operations and more risks, they trade at only a fraction of the price of their much larger counterparts. These are, of course, the infamous penny stocks. This article will look at some of the dangers that lurk in penny stocks trading.

The Myth Of Evolution
One thing that keeps people dabbling in penny stocks is the belief that these corporations will evolve into firms that will become much like their larger counterparts. This has happened, but not as regularly as penny stock proponents would have you believe.

Many public firms simply defer going public until they have grown large enough for it to be worthwhile. Until that time, they will usually raise money through private investors or corporate loans along with their regular operations. Generally, these companies do not need an initial public offering (IPO) to fund an expansion. The larger a company becomes, the more practical it is to raise funds through a public offering, because although equity is seen as a relatively more expensive form of financing, it often becomes necessary for larger companies.

Good Intentions?
If a company is offering its stock at the penny level, it is usually for one of the following reasons. First, the company may be on the cusp of a large expenditure, and it believes that the money raised by an IPO will be enough to finance it. Second, the company may have reached the apex of its growth and it wants to change its tax structure or disperse the profits.

There are also less noble reasons for a company to go through an IPO process when it is still quite small. Sometimes a company is talked into an overpriced and overhyped IPO by penny stock brokerage firms that want to make a quick dollar from unwary investors. An IPO could also be an attempt by the company's owners to offload their ownership to investors because they see little promise in the company's future.

Oranges and Apples
It is important to remember that within penny stocks, there is a wide range of companies. You can find an oil prospecting company with a recognizable corporate structure right next to a family-run organic farm that specializes in cabbage. Some of those companies may allow investors to have a say in who is running the show, and some may be one-man operations that suffer terribly when the founder retires or dies. And while larger companies generally strive to please investors, penny stock companies may pay no mind to their investors at all.

The Bait
Not many value investors spend their time in penny stocks. Although a well-managed penny stock company may see good returns over the years, it is much more difficult to get full disclosure and the rules that apply to penny stocks are much looser. These companies do not face the same standards as large firms, are required to file with the Securities and Exchange Commission (SEC) less frequently and have limited requirements for listing.

What lures investors into the oceans of penny stocks is the dream of buying 1,000 shares for $0.50 and then later selling them for $5 or some similarly lucrative transaction. Unfortunately, that ocean is full of sharks that know exactly what you're looking for.

The Bite
Some people think that brokerage firms that specialize in penny stocks are often just a step up from a guy with a bat waiting to rob someone in a dark alley. Successful companies don't need people to cold call and talk up their stocks. Penny stockbrokers engage in a mixture of cold calling and targeted sells. They often have a collection of leads, people who have had a history of buying into poor investments over the phone or who have given their information to someone who turned around and sold it.

Using this list, the stockbrokers will call prospective marks and introduce themselves. Soon after, be it a day or a week, they will call again with a chance to get in on the ground floor of a stock that is set to rocket away. This will prove to be a stock that they have been pumping up in message boards, emails, newsletters, etc. Then, when investors buy in, the firm and its partners get out and leave a gaping wound in the investors' portfolios. These firms are also known to take their pound of flesh in the form of high commissions. 

These firms, and the brokers that support them, will often use techniques such as advertising in mass emails. You may see mailings in your account about the latest greatest stock that is set to return 1,000%. In all cases, without doubt, it is a penny stock, and one you probably should avoid. 

Multiple Victims
Sometimes the companies involved in these swindles are complicit, but even honest companies find their stocks targeted by unscrupulous penny stockbrokers. These sharks may take an innocent company that has had a few good years and make false publications or claims that "insiders" have said it is poised for a leap. When the brokers pull out, they have not only ripped off investors but also ruined the reputation of an otherwise stalwart company.

Blood in the Water
If an investor has the poor judgment to get involved with penny stockbrokers, he or she may find a permanent target painted on his or her back. Because of the profits and commissions involved, these brokers will persist with their calls until they get your check - after that the calls will dry up and the number may even change. Many of the sharks in penny stock brokerages have securities violations on their records, but it is their ability to sell that keeps other firms hiring them - and it is dishonest profits that keep penny stock brokerage firms in business.

The Bottom Line
By and large, attempts to regulate penny stocks have been thwarted. The low prices make them ideal for manipulation because a few false cents per share can mean thousands if you hold most of the shares. The internet has also offered a whole new medium by which to cheat investors. For every site that exposes penny stock fraud, there are hundreds of sites espousing one undiscovered treasure or another. The best way to avoid getting swindled in the penny stocks is just to stay out of the water - if you don't swim, you won't be bitten.

Read more: http://www.investopedia.com/articles/stocks/07/penny_stocks.asp#ixzz2AmZW70kj

Several common manipulative activities of stock market syndicates

Market syndicates have been around for many decades and their stock manipulative activities have been felt in the United States, Singapore, here and every other market around the world. Their objective has always been to push up share prices and then unload the high-priced shares on punters.


There are several common aspects of stock manipulators, brokers said, and these are some of them:


Scenario one: The IPO route

These stock plays are pre-planned even before the shares are listed on Bursa Malaysia. As the major shareholder may be imposed with a moratorium from selling any of their shares, he would park some of his shares under nominees. The shares in the names of nominees would not come under the moratorium.

The major shareholder would then place out a block of the new shares issued under the initial public offering (IPO) to a stock operator. Let's say the operator gets the shares at 50 sen a piece.

On the listing day, the stock operator will whack up the price of the shares to say RM1 and a day or a few days later, start selling the shares. He won't be able to unload all his shares at the top, but could achieve an average price of say, 70 sen.

If the major shareholder and stock operator manage to distribute (the industry term for unload) 30 million shares, they'd get to share a profit of RM6mil.




Scenario two: Sell pricey stocks to fund managers

In this kind of scheme, the syndicate will push up the share price from say, RM1 to RM3. The syndicate will then place out (industry term for selling sizeable blocks of shares) to fund managers. The fund managers would be induced to buy the shares with a commission secretly paid to them by the syndicate. If the commission is say, 20 sen on five million shares, the fund manager gets RM1mil.

Placing out shares to fund managers has the advantage of holding up the share price for a longer period of time. There would be an understanding with the fund manager that he should not immediately sell the shares into the market.

The syndicate would then continue to ramp up the share price. Inevitably, however, the syndicate will sell off his shares and they usually leave in a hurry. The fund incurs a loss but the fund manager has personally profited with the commission.
  



Scenario three: Sell pricey stocks to punters

This is the stock manipulation scheme that punters are familiar with. A syndicate gets a block of shares of say, two million from a major shareholder and churns a daily trading volume of say, five million shares. This is done by buying and selling the same shares over and over again by syndicate members and their nominees.

The churning is done in such a way that the share price goes up every day, irrespective of sentiment on the market.
The trading activity and rising price momentum gets the attention of punters. The more experienced punters usually recognise the share price is being ramped up. Nonetheless, they pile in to make a fast buck, and hopefully get out before the syndicate withdraws support for the share price.

There will be, however, punters who are newer to the game or have more greed and they stay too long in the stock. When the syndicate sells out within a day or two, usually causing the stock to trade limit-down, punters lose their shirt.

The profits of the syndicate are shared with the company's major shareholder. Usually, this involves companies that are loss-making in their business. Ramping becomes the only way the major shareholder can make a profit.

Source:
http://www.investlah.com/forum/index.php/topic,32721.msg646663.html#msg646663

Sharks, syndicates, big bosses, speculators, liars, cheaters or stock market manipulators.

I believe that most of us have heard of stock market operators. They are known by many different names and they are constantly the blame for our financial losses. In some parts of the world, they are known as sharks, syndicates, big bosses, speculators, liars, cheaters or stock market manipulators. Some of us cheer their existence and their operations while some cursed them as if they are the culprits to our financial ruins. Are they our friends or foes? As the famous saying goes, know thy foes and you will have the upper hand in battle. In this post, I will challenge and dare you to swim with the sharks and eat from the crumbs of their feeds and not to be their feed. Here I would like to bring out some of my personal thoughts on this question that most newbie has.

Ok, here is the short answer. Yes, you are right. They existed and their operations are hidden from most people especially the newbie in these financial markets. I believe if we know them and how they operate, we could actually move along with them. In fact, the whole purpose of technical analysis is to determine the balance of demand and supply and the stock market operators are some of the powerful and rich individuals or groups with much buying and selling power. If we are able to track their movement, we will be able to profit from their operations. However, if we are ignorant of their existence, we could be their next meal.


Basic facts of stock market operators are listed below for your reference.


**They work individually or in a group.
**They rely on the market trends to help them in their mission.
**The general publics are their big customers.
**They together work with the public listed company owners or insiders.
**They have a main mission objective to accomplish.
**The bulk of their operation revolved around the accumulation and the distribution of stocks from / to the general publics.
**They are rich and powerful figures but they are also humans that have emotions like all of us.
**They have extensive credit facilities and lower transaction costs than the retail investors.
**They do make mistakes like any one of us. Their mistake costs millions in dollars.
**Market news, stock market analyst, corporate announcements, word of mouth advertising, price bidding and order queues are some of their tricks and tools that they used to achieve their main objective.
**They don’t try to pick the bottom or the top like most retail investors do. Again, some of them try to do this and it costs them much sorrow and dismay.
**They do attempt to manipulate the chart to trick the chartist whether you like it or not.
**They are both the buyer and seller in the queue order at any given time.
**They are not doing charity work. They existed to make your money.


It is important to understand them well as they are big volume buyers and sellers. They can tilt the balance of demand and supply. Understanding the above traits of stock market operators will help to clear some of the myths that we have of them. Remember, they are humans like us. Some of the above points deserved to be elaborated further to bring out the secrets of trading methodologies that we will employ in our technical analysis.

Primary market trends are very important to their success and failures. If they judge wrongly on this, they could go bust easily as the power of leveraging will work against them. Remember this, they cannot fight against the trends and they don’t have the strength to do so. Don’t ever think that they can swim against the tides.

If their mission objective is to acquire stocks, they might push down the prices to cause temporary market panics to squeeze out the stocks out from the speculators and investors and this is especially true in certain countries where short-selling is not allowed. The success of this technique will depends on what sort of people that are holding the stocks. This will get rid of the intraday and short term traders. However, they will try to maintain the prices around a certain range as to keep the sellers motivated. Usually the public listed company owners and insider will work in tandem to collect the shares from the general public. After they exhausted the fearful speculators and investors, they will then turn their eyes to the stronger speculators and investors by pushing up the prices higher to catch their interests.

If their mission is to distribute stocks, they will push up the stock prices to catch the attention of speculators and investors. They will work with market analyst to create beautiful pictures of the company prospects. They will work with the public listed company owners and insiders to create scarcity of stocks. At this moment of time, they will also announce all the good news while pushing up the stock prices. They will queue up as buyers and sellers in the order queue. They will buy their own stocks to create volume to entice the crowd to follow. As they bid up and down the prices, stocks were distributed without the awareness of the general public.

I believe that this write-up will increase our trading knowledge and make us a wiser trader. I will continue to write of how we can profit from their operation in future posts whenever I managed to get my time organized.

Source:
http://www.investlah.com/forum/index.php/topic,32721.msg646677.html#msg646677

Greed kills, and pigs get slaughtered.

Two directors convicted of market manipulation

Saturday January 8, 2011

Two directors convicted of market manipulation
By M. MAGESWARI
mages@thestar.com.my


KUALA LUMPUR: Former Impetus group executive directors Datuk Philip Wong Chee Kheong and Francis Bun Lit Chun were found guilty of stock market manipulation.

Sessions Court judge S.M. Komathy Suppiah ruled yesterday that the prosecution, led by DPP Ros Mawar Rozain, had proven the case against both accused beyond a reasonable doubt.

“I confirmed that the first accused (Wong) is the mastermind of market manipulation,” she said in her verdict.

Komathy held that both accused had created a misleading appearance of active trading of Suremax Group Bhd shares by buying and selling through nine CDS accounts.

In elaborating, Komathy said her ruling was based on a thorough examination of evidence tendered by 38 prosecution witnesses and the two accused who testified under oath.

She set Jan 12 for the hearing of mitigation and sentencing. If convicted, each accused can be fined a minimum of RM1mil and jailed up to 10 years under the Securities Industry Act 1983.

On Feb 12, 2007, Wong, 49, and Bun, 41, had claimed trial to having created a misleading appearance of active trading of Suremax shares.

They were said to have committed the offence by indirectly being concerned in transactions of sale and purchase of Suremax that do not involve any change in the beneficial ownership of the said shares.

The two were accused of committing the offence together with businessman Ivan Ng Chong Yeng at Bursa Malaysia Securities Bhd in Exchange Square, Bukit Kewangan, between Nov 24, 2004 and March 22, 2005.

On Feb 12, 2007, Ng, 45, who was then group chairman of Impetus Consolidated Sdn Bhd, was acquitted of stock market manipulation through 153 CDS accounts.

Sessions Court judge Akhtar Tahir acquitted Ng after the prosecution said they wanted to withdraw both charges against him.

http://thestar.com.my/news/story.asp?file=/2011/1/8/courts/7755242&sec=courts

Market manipulation

Market manipulation

From Wikipedia, the free encyclopedia

Market manipulation describes a deliberate attempt to interfere with the free and fair operation of the market and create artificial, false or misleading appearances with respect to the price of, or market for, a security, commodity or currency.[1]

Market manipulation is prohibited in the United States under Section 9(a)(2)[2] of the Securities Exchange Act of 1934, and in Australia under Section s 1041A of the Corporations Act 2001. The Act defines market manipulation as transactions which create an artificial price or maintain an artificial price for a tradeable security.

Examples

Pools: "Agreements, often written, among a group of traders to delegate authority to a single manager to trade in a specific stock for a specific period of time and then to share in the resulting profits or losses."[3]

Churning: "When a trader places both buy and sell orders at about the same price. The increase in activity is intended to attract additional investors, and increase the price."

Runs: "When a group of traders create activity or rumors in order to drive the price of a security up." An example is the Guinness share-trading fraud of the 1980s. In the US, this activity is usually referred to as painting the tape[4].

Ramping (the market): "Actions designed to artificially raise the market price of listed securities and to give the impression of voluminous trading, in order to make a quick profit."[5]

Wash trade: "Selling and repurchasing the same or substantially the same security for the purpose of generating activity and increasing the price"

Bear raid: "Attempting to push the price of a stock down by heavy selling or short selling."[6]

References

^ http://www.asx.com.au/supervision/participants/market_manipulation.htm
^ http://www.sec.gov/divisions/corpfin/34act/sect9.htm
^ Mahoney, Paul G., 1999. The Stock Pools and the Securities Exchange Act. Journal of Financial Economics 51, 343-369.
^ Painting The Tape
^ Sanford: Overview
^ Bear Raid: Definition and Much More from Answers.com

Speculative stocks

Thursday, July 20, 2006
Market Talk: Speculative stocks

DJ MARKET TALK: Speculative Stks Hammered; May Fall Further - 2006-07-20 07:29:00.0
1529 [Dow Jones] Speculative issues and stocks usually associated with syndicates sharply lower; Iris (0010.KU) down 29% at 71 sen with 108.7 million shares traded, Poly Tower (7175.KU) down 16.8% at 86.5 sen, Sugar Bun (7036.KU) down 8.6% at 96 sen. "It looks like the syndicates used this morning's knee-jerk reaction to distribute their holdings to retail players. There currently does not seem to be much buying support for these stocks," dealer says; adds stocks may fall further.(VGB)
Investssmart: I am not surprised by the hammering at all. It was just a matter of time and the manipulators chose the best time. Dow Jones Industrial Index rose 212 points of 2% overnight and punters would have expected a sharp rise today on Bursa Malaysia. Of course, many rushed into speculative stocks like IRIS early in the morning hoping to get in at a lower price. It should be noted that IRIS rose by 8% to $1.08 this morning before succumbing to strong selling and reached a low of 67c.

The manipulators are not stupid. They cash in when market sentiment is strong and the naive retail investors purchase the shares hoping for a small gain. Has anyone wondered how much IRIS was worth at its peak? There are 914m IRIS shares, 368 IRIS-PA and 55m IRIS-WA on issue. At their peaks of $1.39, $1.28 and $1.17 respectively, the total value of IRIS works out to be $1806m. Was IRIS really ever worth $1.8 billion? It only made a profit of $1.8m in the latest quarter.

Every investor knows that IRIS is a manipulated counter but that did not stop them from purchasing its shares. Bursa Malaysia designated it. Brokers demand cash up front for purchases. News articles comment on it all the time but yet, some people choose to buy the shares, hoping to make some money from it. Who can you blame when they lose money? If someone throws a gold bar into the river and tell you that the river is infested with crocodiles but yet you jump in for the gold bar, who is to blame if you are eaten by the crocs?

The point I am trying to say is "dont try your luck in manipulated stocks". You may earn a little money each time but you could lose it all in just one day. This is an extract from an Australian financial journalist's comments on the share market:

"You need patience. If you try to rush your financial transformation you will fail. Patience is about having realistic expectations. You won't get anywhere trying to make money every day. I've seen people in the market who spend most of the time doing nothing. Just sitting watching things going by. On the lookout. They don't try to generate opportunities out of nothing, they just wait for them."

In conclusion, there is no need to try and earn a little bit of money every day. Even with IRIS at 82.5c, IRIS-PA at 43.5c and IRIS-WA at 38c, it is still way overvalued with a total value of the company at close to $1b. Everyone knows IRIS rose because of the manipulation of its shares. If you are still trying to beat the manipulators to make a profit, please give up because it is almost impossible. In this game, you are the player, the manipulators are the bankers and I don't remember GENTING ever reporting an annual loss. You may beat them once, you may beat them twice or even 10 times but at the end, there is only one winner. And unfortunately, it won't to be the player.

Disclaimer: This report is brought to you by Investssmart, an unlicensed investment adviser. Please exercise your own judgment or seek professional advice from your remisiers. By law, they are the experts. I am not responsible for your investment decisions.

http://investssmart.blogspot.com/2006_07_01_archive.html

Thanks SC and Bursa, for alerting investors of possible market manipulations

In todays paper in the Star (18.6.09), the headline reads:

On the alert. SC and Bursa to act against market manipulators.

Investors beware!

Thursday June 18, 2009
SC and Bursa to act against market manipulators
By YAP LENG KUEN


PETALING JAYA: The Securities Commission (SC) and Bursa Malaysia will investigate and take action if there is any evidence of stock market manipulation amidst the current liquidity-driven rally.

“Both the SC and Bursa carry out surveillance of all trading activities on the exchange.

“The scope of surveillance covers all dimensions of the trading activities. If there is any evidence of market manipulation, the SC and/or Bursa Malaysia will investigate and take appropriate enforcement action,” an SC spokesman said in an e-mail response to queries from StarBiz. “This is further complemented by SC’s investor education programmes conducted regularly to help investors make informed investment decisions.”

Since early May, Bursa has issued six unusual market activity (UMA) queries, following sudden surges or drops in share price or volume traded. The first query went to Unisem (M) Bhd (May 6), followed by Measat Global Bhd (June 4), Transmile Group Bhd (June 5), SAAG Consolidated (M) Bhd and Compugates Holdings Bhd (June 11) and Equine Capital Bhd (June 16).


Recent price movements of some counters

Bursa chief regulatory officer Selvarany Rasiah said as a frontline regulator, Bursa had a duty to ensure an orderly and fair market.

“The maintenance of an orderly and fair market necessarily means that the exchange focuses on identifying the presence of any manipulative or artificial nature of trading on the market. On this note, to be clear, it is the manipulative or artificial nature of trading (in the sense of being false or resulting from trickery or deception) that is of concern to the exchange,’’ she said in a statement to StarBiz.

“Where trading takes place in an informed market and in the absence of manipulative conduct, the exchange believes it is a matter for investors to make a decision as to whether to participate.

“So-called speculative trading is not in itself offensive or undesirable but it is not tolerated by the exchange if it transforms into a market offence such as manipulative trading conduct.’’

“While those in the market may only see the UMAs or market alerts – or only be aware of the contact we have directly with them – the exchange engages in a high level of activity across all facets of the market, monitoring and investigating trading and initiating a range of regulatory responses to ensure that the market is fair, orderly and informed.”

On comments that the current market alerts were reminiscent of those issued in old times, she said: “Stock markets, this one included, tend to be cyclical and when market levels change, the exchange will come in as necessary to inform investors about the importance of ignoring rumours and basing their trading decisions on research and a careful consideration of the fundamentals of the stocks that make up the market.

“The exchange will continue its active monitoring of trading, engagement with brokers and registered persons, its use of a range of regulatory responses from those that can be implemented immediately to investigation and disciplinary action which necessarily takes more time to complete.’’

Hence, she added, the market could expect to see continued use of UMAs and market alerts, a continuation of Bursa’s awareness raising activities and emphasis on the role of listed issuers, participating organisations and registered persons’ play in ensuring market integrity.

“We note also the value, particularly to investors, of the publication and reporting of market alerts and other information about trading activity on our market,” she said.

---

"Where trading takes place in an informed market and in the absence of manipulative conduct, the exchange believes it is a matter for the investors to make a decision as to whether to participate.

So-called speculative trading is not in itself offensive or undesirable but it is not tolerated by the exchange if it transforms into a market offence such as manipulative trading conduct."

----

Wednesday June 17, 2009

Equine queried on heavy trading


PETALING JAYA: Equine Capital Bhd (ECB) in reply to a Bursa Malaysia query yesterday said it was not aware of any event that may have contributed to the unusual market activity in its shares recently, in particular, on June 15.

ECB was the most heavily traded counter on Monday with 50.28 millions exchanging hands.

In a filing with Bursa, the ECB board of directors said that they were not aware of any corporate development relating to ECB group’s business and affairs that had not been previously announced that may account for the unusual market activity.

“We do not have any other possible explanation to account for the unusual market activity,” it added.

Since April, Bursa has issued five unusual market activity queries, issued when the share price or volume of a company suddenly surges.

The first for the year was on May 6 when it queried Unisem (M) Bhd, followed by four more this month, starting with Measat Global Bhd on June 4, Transmile Group Bhd the next day, and SAAG Consolidated (M) Bhd and Compugates Holdings Bhd on June 11.

Meanwhile, Compugates told Bursa yesterday group managing director and substantial shareholder Goh Kheng Peow had received margin call notices between June 2 and June 7 from Malacca Securities, EON Bank Bhd, OSK Investment Bank Bhd and Malayan Banking Bhd.

Earlier, in a reply to Bursa’s query on June 11, Compugates said the recent high trading volume was caused by a reduction of margin facility to Goh by stockbrokers.

For example, RM5mil was revised downwards to RM1.5mil effective May 20 by TA Securities.

EQUINE : [Stock Watch] [News]

http://biz.thestar.com.my/news/story.asp?file=/2009/6/17/business/4132023&sec=business

Market Manipulation

Charles Dow wrote in 1901: "The manipulator is all-powerful for a time. He can move market prices up or down. He can mislead investors, inducing them to buy when he wishes to sell, and sell when he wishes to buy; but manipulation in a stock cannot be permanent, and, in the end, the investor learns the approximate truth. His decision to keep his stock or sell it then makes a price independent of speculation and, in a large sense, indicative of true value."

In the current regulatory situation, manipulation, though it does crop up, is less common.

Also read:
Stock Market Manipulations
25 Nov 2008 BURSA MALAYSIA SECURITIES BERHAD REPRIMANDS, FINES AND STRIKES OFF PNEH TEE EONG, A COMMISSIONED DEALER'S REPRESENTATIVE OF M&A SECURITIES SDN BHD FROM THE REGISTER FOR VIOLATION OF RULES 404.3(1)(a) & (b) AND 401.1(2) & (3) OF THE RULES OF BURSA SECURITIES