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Revealing the ‘circus’ trick, inflated stock prices

Securities expert Hoang Viet Cuong said that creating fake liquidity, “inflating the price” of stocks that people often talk about is just one of many types of fraud in the stock market. The “pilot” or “shark” on the exchange has many other malicious acts such as: insider trading, falsifying offering documents, listing securities, even falsifying reporting data…

Revealing the 'circus' trick, inflated stock prices - 1

If not carefully observing the market, individual investors can suffer heavy losses under the tricks of the “driver team”. (Illustration)

Accordingly, in order to manipulate stock prices, the “drivers” will carefully calculate, make detailed plans and conduct a step-by-step plan to support the buying or selling process. Usually they will choose stocks with low price, not high daily trading volume, but good supporting basic information.

When they have “collected” to a large enough amount, they use many accounts to buy and sell in huge volume to create fake supply and demand, stock prices are continuously pushed up. Many inexperienced investors, eager to profit, will “surf” to make a profit.

When the “driver” has pushed the price up to an attractive level, they will release the goods, often the price can increase up to several hundred percent. Of course, there are many investors who determine the right time to “buy early” and “sell quickly” when the profit target is reached and still make a profit. But on the contrary, there are many “drunk” customers who are slow to exit the goods and have to suffer very heavy losses.

“These tricks are not new and have been repeated many times, but there are still many investors who are greedy for profits, or cannot control their emotions when participating in the market and have fallen into losses.” Mr. Cuong said.

Securities expert Hoang Sy Tien once shared a sophisticated way to make prices by “pull and discharge” movements right in the session and collect profits slowly. First, speculators will choose some basic stocks at an acceptable level, with large shareholders to sell out, with low trading liquidity.

Next, they often do not choose to suppress shares to collect on the exchange, but buy directly from major shareholders and corporate boards. This amount of stock is usually enough to gain control of the company. Once they have collected, they will push the price on the floor and are ready to buy the remaining investors’ shares.

When pushing to a certain threshold, they will announce the issuance to increase capital by sharing bonus shares. Then push the stock price up. This phase will attract many retail investors to participate because the price has been divided to low and liquidity increases continuously, then proceed to issue more massively with buying rights. Then the stock price will be divided down to only about 1/3 of the peak price pushed up. Then they pushed and released, helping the stock have high liquidity.

Many individual investors at this time will find it attractive and involved. During this pull-out process, they will sell the available shares to use the money to buy the right to buy additional issues. When more shares are issued to their accounts, they can both buy and sell at the floor price to attract investors to participate in bottom fishing. This is called the “floor price distribution” strategy.

With that trick, the number of shares held by the “driver team” after exiting the stock is quite small (maybe only equal to the volume of shares bought before). On the contrary, they obtained a large amount of money from additional issuance while still gaining control of the company.

One of the sophisticated “tricks” on the market is “turning around”. Securities Company become a backyard for “family” to manipulate stocks. Expert Nguyen Hoang Hai (VAFI Financial Investment Association) once pointed out the phenomenon of enterprises acquiring small securities companies as trading tools.

In fact, there are thousands of trading accounts borrowed in the name of employees in the enterprise, relatives, but daily transactions are performed by securities companies. This can be easily determined with regular accounts with transactions of tens or hundreds of billions of dong while the account holder is just an employee with normal income.

Even though there is a situation where the share price is much lower than the par value (under VND 10,000) for a long time, the business owner still conducts many rounds of selling new shares at par value, the issue price is higher. market price 40 – 50%. These deals are not bought by retail investors in the market, nor are value investors, so who buys, who sponsors or is it just a matter of increasing charter capital to sell paper?

“Who benefits, who suffers, and why is no one responsible? Why do they buy high then sell low? Does the “strategic investor” accept a loss of hundreds of billions of dong or is it just a buying trick, then all the money is withdrawn and refunded and the issuer has a basis to sell paper for real money? , Mr. Hai questioned.

Need to forcefully quell the “riot”

Many investors and experts expressed their support for the strong handling of violating organizations and individuals in order to clean up the stock market.

Securities expert Hoang Viet Cuong said that the mistakes of some individuals above stock market It’s been a single phenomenon lately. But to promote market development, managers need to take tough measures to clean up the market.

According to Mr. Cuong, one of the measures to help limit securities violations is that the management agency needs to disclose information without discrimination. Procedures should be clear, supervisory inspectors should be available, and a hotline should be available to report suspected partition violations.

“The story of market manipulation can emerge at some point. Therefore, investors always have to have a suitable strategy, buy which stocks, sell first, choose potential stocks to overcome the difficult period of the market.” Mr. Cuong said.

According to Assoc. Prof. Dr. Ngo Tri Long, tricks to manipulate the stock market will leave many unpredictable consequences. In particular, the immediate damage is to upset the market movement, making it easy for retail investors to bear heavy losses in assets. Further, this will greatly affect investor confidence, interests, sustainability, publicity and transparency of Vietnam’s stock market.

Although there have been many cases of price manipulation discovered and sanctioned in the past time, Vietnam’s sanctions are still very low, not commensurate with the seriousness of the behavior, it is not enough of a deterrent.

According to Mr. Long, in the context of complicated developments of the COVID-19 epidemic, lower savings interest rates, more money poured into securities, causing the index to constantly increase. But the recent erratic ups and downs show that the bull market is not stable, there is a potential risk of speculation and price manipulation.

“The stock market is considered a barometer of the economy. In order to measure accurately, stock prices must accurately reflect the intrinsic value of the business and reflect relatively accurately the fluctuations of the economy.

In fact, when the COVID-19 epidemic develops abnormally, the whole economy When it comes to difficulties, businesses are also struggling, the stock market is constantly increasing hot, many sessions fluctuate erratically, causing investors to ask many questions.experts share.

Mr. Nguyen Hoang Hai also said that it is time to open a comprehensive inspection campaign to reduce stock manipulation, ensure strict securities law enforcement and strengthen investors’ confidence. securities investment and the community of listed companies.

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