Proprietary day traders/stockists

If you want to make money from the crooks, must think like a crook — 2 Sep 2014

Stock evaluation strictly based on cheng kay's perspective on M&A deal is a totally different ball game.

SunVic reminds me of one SGX-listed S-Chip, Delong Holdings. The M&A deal failed and all its shareholders suffered heavy losses.

The cheng kay could be the owner (major shareholder) of the public-listed company, the insiders (SSHs) and/or outsiders = stock brokers/syndicate players.

The Players — oldman

Don't trust people so easily — oldman

How share market crooks operate in Bursa Malaysia

Market syndicates have been around for many decades and their stock manipulative activities have been felt in the United States, Singapore, Malaysia and every other market around the world.

Their objective has always been to push up share prices and then unload the high-priced shares on punters.

There are several common aspects of stock manipulators, brokers said, and these are some of them:

Scenario one: The IPO route

These stock plays are pre-planned even before the shares are listed on Bursa Malaysia. As the major shareholder may be imposed with a moratorium from selling any of their shares, he would park some of his shares under nominees.

The shares in the names of nominees would not come under the moratorium.

The major shareholder would then place out a block of the new shares issued under the initial public offering (IPO) to a stock operator. Let's say the operator gets the shares at 50 sen apiece.

On the listing day, the stock operator will whack up the price of the shares to say RM1 and a day or a few days later, start selling the shares. He won't be able to unload all his shares at the top, but could achieve an average price of say, 70 sen.

If the major shareholder and stock operator manage to distribute, the industry term for unload, 30 million shares, they'd get to share a profit of RM6mil.

Scenario two: Sell pricey stocks to fund managers

In this kind of scheme, the syndicate will push up the share price from say, RM1 to RM3. The syndicate will then place out, industry term for selling sizeable blocks of shares, to fund managers.

The fund managers would be induced to buy the shares with a commission secretly paid to them by the syndicate. If the commission is say, 20 sen on five million shares, the fund manager gets RM1mil.

Placing out shares to fund managers has the advantage of holding up the share price for a longer period of time. There would be an understanding with the fund manager that he should not immediately sell the shares into the market.

The syndicate would then continue to ramp up the share price. Inevitably, however, the syndicate will sell off his shares and they usually leave in a hurry. The fund incurs a loss but the fund manager has personally profited with the commission.

Scenario three: Sell pricey stocks to punters

This is the stock manipulation scheme that punters are familiar with. A syndicate gets a block of shares of say, two million from a major shareholder and churns a daily trading volume of say, five million shares. This is done by buying and selling the same shares over and over again by syndicate members and their nominees.

The churning is done in such a way that the share price goes up every day, irrespective of sentiment on the market.

The trading activity and rising price momentum gets the attention of punters. The more experienced punters usually recognise the share price is being ramped up. Nonetheless, they pile in to make a fast buck, and hopefully get out before the syndicate withdraws support for the share price.

There will be, however, punters who are newer to the game or have more greed and they stay too long in the stock. When the syndicate sells out within a day or two, usually causing the stock to trade limit-down, punters lose their shirt.

The profits of the syndicate are shared with the company's major shareholder. Usually, this involves companies that are loss-making in their business. Ramping becomes the only way the major shareholder can make a profit.