Apollo Investment Management

An e-mail received from one of our brokers sets out important new operating procedures:

Capitalism with Communist Characteristics

The recent efforts of the Chinese authorities to prop up their stock market have been pretty comprehensive and widely commented upon. They are also getting imaginative. They include:

Forbidding short selling
Telling state pension funds to put 30% of their assets in stocks
Lowering interest rates
Telling brokers to give forbearance on margin calls ie don't liquidate the punters just coz they can't pay
Forbidding major shareholders and directors of listed companies from selling for six months
Getting brokers to use their own capital to buy and hold until the market goes back up
Getting fund managers to buy
Getting the owners of fund management companies to buy with their own cash
Allowing companies to suspend exchange trading in their shares so that they cannot drop further

I've probably missed a few more.

Now don't think that I am suggesting that this sort of thing never happens in the west. We all remember the Hong Kong Monetary Authority controversially using public money to prop up the stock market in 1998. We are still living with the cost of the Fed bailing out their mates at Goldman, Merrill, Morgan Stanley, etc, etc to stop them going broke. Then back in 1980 Comex changed the rules of the silver market to screw Bunker Hunt and save the shirts of the big traders. In 1970 the Paris sugar market changed the rules when speculators were (for once) on the right side of a big price move which would have bankrupted exchange members. They simply declared the price rise to constitute force majeure and announced that all open trades would be closed out at a backdated, much lower, price which shafted the punters but kept the insiders solvent. So we have a long history of manipulative practices of our own.

Interestingly, in this instance the Chinese are actually supporting the private punters at the expense of the big boys. This is true socialism. I love it.

In a spirit of patriotism and support I have decided that we will institute the following measures. Until further notice none of my clients will be allowed to sell any shares that I own without my express prior approval. This will obviously be withheld until I have decided whether or not I want to sell first.

All the very best from

  Hong Kong
  9 July 2015

"Grumpy" is also known as Clive Rigby (SFC license CE number AAD724).
He is Managing Director of Lippo Securities and Lippo Futures in Hong Kong, and trades for international clients on worldwide markets. He can be contacted on rigby@lipposec.com

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