Summary of Key Points
Recently, the A-share stock of Zhonggong Education saw a 25% increase in just five days due to vulgar gambling posts on a stock forum. This represents the latest variant of an "internet tactic" used to manipulate the stock market. Such tactics involve creating hot topics online, spreading false information, and inducing retail investors to follow suit, only to reap profits later on. At its core, it's a game of "deception and speculation" designed to exploit naive investors. These practices distort market pricing and harm small and medium-sized investors. Online platforms, driven by the desire for traffic and revenue, often turn a blind eye or even encourage such illegal content. Regulatory authorities have already stepped in to address this issue. In the future, it will be essential to hold platforms more accountable, improve relevant systems, and enhance investor education to eradicate these practices.
I. The "Internet Tactic": A Stock Market Scam Under the Mask of the Internet
The "internet tactic" refers to a strategy where speculative funds or manipulators use online channels to influence investors, causing them to buy while they secretly sell their own shares. There are four main methods:
- Deceptive "Insider Information": Speculative funds collude with "information dealers" to present fake news as "inside knowledge" (e.g., a company is about to restructure or has a major order). This information is then spread through WeChat groups, Xueqiu (a stock information platform), and other forums. For example, Zhongji Xuchuang's stock price fluctuated significantly due to such false claims, leading many retail investors to buy at high prices and get trapped.
- Precise "Predictions": Someone posts in advance that a certain stock will hit a limit down or up at a specific time (e.g., Nanjing Chemical Fiber at 2:34 PM or Zhongtong Bus at 1:20 PM), and it actually happens. This is a planned maneuver to make retail investors believe the predictions are accurate and buy, only for them to lose their money when the price moves in the opposite direction.
- Emotional Manipulation: Tragic stories (e.g., "a child's serious illness needs the stock to hit a limit up") or vulgar content (e.g., gambling posts about Zhonggong Education) are used to attract traffic. Investors buy out of sympathy or curiosity, and once the stock price rises, the manipulators sell their shares.
- Short-Selling on Recommendations: Influential individuals (known as "big Vs") build a following on platforms and then publicly recommend stocks. Once investors buy, they sell their shares at a profit. For instance, a big V named Jin Yongrong recommended 32 stocks and made a profit of 40 million before being penalized.
II. Why Should This Tactic Be Strictly Cracked Down On?
The consequences are severe:
- Distorted Market Pricing: Stock prices should be determined by a company's performance and industry prospects, but false information and speculation can mislead investors, leading to undervalued good companies and overpriced poor ones.
- Exploiting Retail Investors: Manipulators set traps, waiting for investors to buy before selling their shares at high prices, leaving them with huge losses.
- Undermining the Market: If everyone loses trust in the fairness of the market, no one will invest, and the capital market cannot thrive.
III. Why Are Online Platforms Becoming Accomplices?
Online platforms play a crucial role in this scheme:
- Lax Review Processes: They often ignore obvious violations (e.g., fake news and vulgar gambling posts).
- Algorithmic Promotion: Algorithms prioritize sensational and provocative content, promoting its spread for user engagement and advertising revenue.
- Mutual Interest: Illegal content generates traffic, which converts into revenue for the platforms. As a result, platforms and manipulators form a symbiotic relationship.
IV. How Can Regulation Address This Problem?
To effectively combat this issue, regulatory authorities need to focus on several key areas:
- Hold Platforms More Accountable: Require platforms to conduct thorough reviews of securities-related information. For instance, algorithms should trigger manual checks for claims of "inside knowledge" or precise predictions. Abnormal content should be restricted, deleted, or banned to prevent algorithmic manipulation.
- Improve Systems and Education: Strengthen corporate disclosure to provide investors with accurate information and promote rational investing practices (e.g., educating them not to trust rumors but to base decisions on company performance).
- Penalize Violating Platforms: Evaluate platform performance and impose fines or warnings on those that allow such activities to continue.
V. How Can Retail Investors Protect Themselves?
Here are some tips:
- Don't Believe Rumors: 99% of the "inside information" and "precise predictions" shared in stock forums and WeChat groups are false.
- Don't Let Emotions Drive Your Decisions: Don't be swayed by tragic or vulgar content; stock price fluctuations are unrelated to such factors.
- Focus on Real Performance: Research companies' financial reports and industry trends before buying stocks.
- Report Suspicious Activity: Report any suspicious information to regulatory authorities or platforms to prevent more people from being deceived.
The capital market is not a casino; rational investment is the key to long-term success.