2008-01-12

Mainland Market Manipulation

Here's a Forbes article on various ways people manipulate the Mainland stock market:
The fastest bucks are to be made by front-running. Known in Chinese as laoshu cang (老鼠藏), or "rat storage," front-running is illegal, just as in Western markets. The rat in question, a manager of a mutual fund, buys shares for himself privately before his fund buys, then sells for a profit after the fund's much bigger purchase helps drive up the share price. The rat stores away some cheese for himself and moves on to the next trade. Or he teams with a Lin sort for a bigger nibble.

Regulators acknowledge front-running to be a widespread problem, but virtually nobody gets caught. The only exception in the last two years proves the rule. Shanghai fund manager Tang Jian, fired last May from China International Fund Management, a joint venture between JPMorgan Fleming and a Shanghai securities company, had raised just about every red flag possible to bring about his own downfall. According to state media reports, within months of taking over a stock fund in 2006, he complained about his salary in an e-mail at work, talked about front-running on firm-monitored telephone calls, opened a trading account with his father's government identity card, bought an expensive home and a BMW, divorced his wife and ran off with an office intern on a quickie honeymoon to Brisbane, Australia. He tallied at least $200,000 for his rat cellar.


Check it out. Then end of the article has a great list showing shares of companies trading with P/S multiples in the hundreds and P/E multiples in the thousands.

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