Follow
Investigation into the massive Chinese stock market decline as apparently unveiled possible influences it would have got from a couple of trading companies which are suspected of having manipulated futures trading.
The state run Xinhua news agency as announced that a governmental investigation team, headed by Vice Minister of Public Security Meng Qingfeng, has found clues of market manipulation after investigating records kept by China’s Securities Regulatory Commission in Shanghai.
The investigation team described what it found as “malicious short-selling of stocks and stock indices”, which is just one of the practices which specialists believe led to 30 percent stock market plummet. The team was constituted one week after the Chinese government threatened to launch a “serious investigation into issues of market manipulation”.
No other information has been offered regarding the identity of the companies suspected or what kind of prosecution they face, but the investigation will continue until a clear image of all shady market movements involved with the crash will be established.
It is unclear how if in any way this is going to affect China’s market liberalization process, started two years ago alongside the presidency of Xi Jinping. If the investigation proves accurate, this would be the first major setback caused by liberalization-related risks, and it might prompt the Chinese government to take a more cautious approach to the issue in the future.
However, despite the rapid liberalization, China still reserves for itself more means of intervention than most other countries in such issues, and its supportive measures – putting a stop to initial public offerings, limiting futures trading with a major small-cap index and even direct investment of government funds – have apparently prompted a rebound, as the market index rose for two days in a row Thursday and Friday.
But the Shanghai Composite Index is still down more than 25 percent since the beginning of June, before the crash. Some analysts are pointing out the fact that, malicious practices aside, the drop represents the market evening itself out after a long period of extended growth, which brought it up 150 percent throughout a single year.
Futures trading manipulation has also done damage to the United States in recent times. In April 2015, a futures trader was arrested to the UK in relation to the May 2010 “Flash Crash”, which saw the Dow Jones Industrial Average plummet 600 points in five minutes. The trader used automatic trading software to manipulate prices of Standard & Poor 500 futures contracts, also known as E-minis, whose price drop as result of the manipulation played a big role in the Dow Jones plummet.
Image Source: jhaine6a
