Penny stocks and illiquid shares are more susceptible to manipulation in light of the rapid dissemination of information on online platforms and social media, said Secretary for Financial Services and the Treasury Christopher Hui Ching-yu.
But the government and regulators do not tolerate any acts of suspected market manipulation or infringement of minority shareholders' rights, Hui said in a written reply to lawmakers.
The Securities and Futures Commission (SFC) has adopted a multi-pronged strategy to combat market manipulation activities comprehensively, including "pump-and-dump" schemes, he said.
The SFC and Hong Kong Exchanges and Clearing (0388) conduct continuous daily market monitoring and real-time data analysis to detect unusual price and turnover movements to identify suspicious manipulation activities at an early stage, Hui noted.
The SFC issues "high shareholding concentration" announcements to alert investors to related risks in cases of excessive shareholding concentration or other anomalies, he said.
On enforcement, the SFC takes appropriate criminal, civil and regulatory actions depending on the nature of individual cases, Hui said, adding that in recent years, market manipulation cases have resulted in custodial sentences, reflecting the courts' strong deterrent stance against such misconduct.
The SFC will continue to maintain close collaboration with the police and other enforcement agencies, strengthening intelligence exchange and joint efforts to combat market manipulation activities, said the secretary.
Driven by various enhancement measures, liquidity across companies of different market capitalisation levels has become more broadly distributed, Hui said.
Market liquidity overall increased by 65 percent between 2021 and May. Among them, liquidity of companies ranked 21st to 100th and those beyond 100th in market capitalization rose by 92 percent and 61 percent respectively, raising their share of total market turnover from about 61 percent to about 68 percent, Hui noted.
He added that this distribution is comparable to other major Asia-Pacific exchanges including Japan, Korea and Taiwan.
