China Stocks
An investor looks at an electronic board showing stock information at a brokerage in Shanghai.Reuters

China's top authorities are reportedly investigating a possible price manipulation in the stock market.

Officials familiar with the matter told the Wall Street Journal that given the recent suspicious activity in the stock market, the authorities have launched a probe to scrutinise if investors were pumping up prices of some specific stocks.

One of the officials reportedly told the publication that the practice of price manipulation was "making a comeback" after the government recently increased base interest rates to buoy the economy.

The Shanghai Composite Index rose 1.6 percent while the Han Seng Index also increased 3.8 percent. According to the data compiled by Bloomberg, the Shanghai index was 86 percent above its 30-day average and at its highest level since November 2010.

Earlier this month, regulators warned investors of the risk of price manipulation, asserting that a buying spree had driven trading turnover to more than $163 billion.

Officials told Bloomberg that the illegal activity of stock manipulation was "raising its head" again and urged investors to use their discretion while putting their money in the stock market.

"I hope investors, especially small and medium investors that are new to the market, invest rationally, respect the market, fear the market and bear in mind the risks present in the stock market," Deng Ge, spokesman for the China Securities Regulatory Commission (CSRC) was quoted by the agency.

The Chinese authorities said earlier that they had no tolerance for insider trading.

"Here we make a solemn declaration. The CSRC has zero tolerance for insider trading and crimes in the securities and futures markets," he said. "We will resolutely crack down on every securities crime we discover," the China Securities Regulatory Commission was quoted by The Financial Times after the officials nabbed an investment company that was "orchestrating" prices in the market.

Global Trend

Experts say that stock manipulation is a new trend in the global trading market. In a report for the Center for Research on Globalization, Dr. Paul Craig Roberts, a former assistant secretary of the US Treasury explained how market manipulation continues on the global trading platform.

"The stock market is high because corporations are the biggest purchases of stock. Buying back their own stock supports or raises the share price, enabling executives and boards to sell their shares or cash in their options at a profitable price. The cash that Quantitative Easing has given to the mega-banks leaves ample room for speculating in stocks, thus pushing up the price despite the absence of fundamentals that would support a rising stock market," Dr. Roberts wrote.

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