Ex-SFC chairman warns of rising volatility in HK stock market

May 12, 2015 10:15
Former Securities and Futures Commission chief Anthony Neoh supports the establishment of a volatility control mechanism in the stock market. Photo: HKEJ

Anthony Neoh, former chairman of the Securities and Futures Commission, has warned of more volatility in the city's stock market amid the influx of capital from mainland China, the Hong Kong Economic Journal reported Tuesday.

The alert came after the share price of Yan Tat Group Holdings Ltd. (01480.HK) went on a roller-coaster ride last Friday and slumped further on Monday, marking a steep decline of 90 percent from its peak in just two trading days.

The "pump and dump" trading style could indicate insider trading, said Neoh, who is now a member of an international committee advising the China Securities Regulatory Commission.

The situation should have drawn the attention of the Hong Kong securities watchdog, but it is always hard to find enough evidence to prosecute a case, Neo told the newspaper in an interview. 

Brokerage firms are obliged to report any suspicious transactions to the authorities, he added.

The Hong Kong Exchanges and Clearing Ltd. (00388.HK) has conducted a three-month consultation on the establishment of a volatility control mechanism in the city's stock market.

One proposal is to a launch a five-minute cooling-off period in the trading of large-cap stocks within a fixed price range when the next potential trade of a covered instrument would exceed the dynamic price range.

Neoh said it may be worth considering to put in place such a mechanism for all stocks.

Translation by Vey Wong

[Chinese version中文版]

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Hong Kong Economic Journal