Stock scam crackdown long overdue

Chef "Chee Gor" Wong Wing-chee is undoubtedly a household name here in the SAR - whether for good or for bad.

Due to his regular appearances on TV cooking shows, Wong is no stranger to Hongkongers and many a housewife could readily name the chef by his nickname, as well as the brand he once stood for.

It will never be known how many investors bought Dragon King shares when the celebrity chef floated the restaurant group on the GEM board of the exchange in 2018 - based simply on Wong's popular image rather than the company's actual business.

Then came this week's turn of events. Wong was believed to be among a group of nine individuals arrested by the police in a joint operation that also involved the SAR's Securities and Futures Commission and Singapore's Monetary Authority on suspicion of money laundering and alleged stock manipulation.

The accusations alleged they had formed a "ramp and dump" scam making use of China's most popular messaging platform WeChat to hype up the stock price of Dragon King with social media posts urging followers to buy the stock.

Once the share price was inflated to a new high, the alleged scammers sold their holdings at inflated prices to pocket a hefty sum while unsuspecting investors were left to face the brutal crash.

Back in June, Dragon King's stock price tumbled 80 percent from HK$2.20 to HK$0.248 per share. Only several days before the crash, the alleged scammers disposed of their holdings in successive sales.

The investigation is still underway following the arrests of the accused, including a woman in Singapore. It is expected more details of how the alleged scam operated will be made public in court at the end of the investigation.

The crackdown on the alleged market manipulation is welcome.

Indeed, there has to be a crackdown on any kind of market irregularities if Hong Kong wishes to preserve its reputation as a trustworthy financial center.

Tricks such as the kind alleged in the current case are not new, but they have become more effective than before due to the popularity of mass communication apps.

In the past, it would take some time for a syndicate to put up the settings and then wait to reach their target groups to feed them messages that were massaged with misleading information.

With the emergence of popular communication apps, including WeChat and WhatsApp, it has become much easier to disseminate misleading information among followers to hype up the worth of a stock in order to sell at a premium price later.

Needless to say, integrity is fundamental to the long-term success of any financial market.

Even if Hong Kong were not caught up in the ongoing Sino-US conflicts, it would still be important for it to work to preserve its reputation as a preferred place to raise capital.

Only through action can the SAR demonstrate to the world that it is capable of stamping out cheaters and maintain a high standard of integrity.

In addition, the Hong Kong exchange must also exercise greater caution in scrutinizing listing applications.