The
Enclosure 5.
Daily Press.
HONGKONG, JUNE 25TH, 1891.
CORRESPONDENCE.
We do not hold ourselves responsible for the opinions- expressed by our Correspondents.]
SHORT SELLEES OF SHARES IN
PUBLIC COMPANIES.
TO THE EDITOR OF THE "DAILY PRESS. DEAR SIR, I have waited to hear and read all the pros and cons in reference to Mr. Kesrick's Share Bill before committing to print any ex. pression of opinion on the subject. In the dis. cussion that has gone. on, macb to my amaze ment little has been said to show what the "bear" in the stock market really is; attention appears to have been concentrated on the " ball” and his action as affecting shares. In his ad- dress at the bar of the Legislative Council, Mr. Francis, like un astato consol, cloverly led his hearers from the soont, and Mr. Keswick was evidently unable to bring them back to it Up to this moment those members of the Chamber of Commerce and the Legislative Council whose support is necessary to pass the proposed Ordin- ance have not been enlightened as to what a true bear" is. against whose machinations Mr. Keswick is seeking a remedy.
With your permission I will endeavour to illus- strate what manger of being this parasite of! modern business is, and how he works in Houg- kong.
Mr. Francis has stated that if or when Mr.: Keswick's Bill becomes law the bear may buy 3.000 shares, enhance prices by so doing. sell out 2,000 shares on time, giving the numbers in the contracts, and then sell out the remaining 1,000 shares, and thus "bear" the market. This is what the bear may do when the Share Bill becomes law, but Mr. Francis did not toll his bearers what such a hear is doing or might be capable of doing at present. The Q.C's bear might be called philanthrophic bear, seeing that he would do some good to the bulk of the propristors in a company by affording them an opportunity to sell out at enhanced prices when he doos so bim- self. A true bear has little affluity to the above type: he does no bulling, but hattens on the balling of others. A bear is usually a mis- anthropa. He cannot be a well-wisher to his fellows, nor at heart can he appreciate or follow that noble precept-" Do unto others as ya would that they should do to you." A bear may be rich or he may be poor, but the successful bear must necessarily have money. He must hold in his grasp shares which he ana throw on the market to cause a full when he so wills it. The smaller bears who follow in bis wake us bis satellites are impecunious, and generally disap- pointed men. Disappointed "bulls" generally turn into inveterato" bears." Balla invariably have means, but bears need have little sash.
When making sales the latter usually make soma sacrifice of the rates ruling. It is not in humau nature to throw away money. When a sacrifice is made like this it is evident the person so saori- ficing has nothing to lose. For this reason the fall in rates caused by a bear is made with a run, whereas if a bull were to sacritico shares with which he was encumbered the drop in rates could not be so sudden or rapid.
693
C. O.
18313
Rece
Reg 14 SEP 31
A true bear holds a few shares, say a thousand, of each stock or company in hand, and waits his opportunity. It comes, it may be, by some good news, good stroke of business, excellent re- sults of the working, or a slice of sudden lack, causing certain stock to boom. While the shareholders of such company are jubilant over their good fortune, the bour creeps in. As a shrewd man of the world, knowing full well that in the natural course of things there are ebbs and floods in every tide, and that after a storm a calm will supervene, he silently commences to swamp the market with sales on time.
The farther forward he sells the botter prices ho gets and the larger the number of shares ho is ablo to dispose of, because of the cus- tom in vogue here of buying as far as six and eight months ahead: He thus attacks nearly every stock that raises its head on the market. Let me instance. Some small bon fide inves- tors, who have money due to them in the course of a few months, buy with the view of cloaring such purchases, get advances from the Banks against such shares and intend to hold them nutil their savings shall enable them to redeem such shtres. These man and other speculators who buy simply to take or pay differences are rained. Especially the former, who lose the sual margin they had orpooted to place in the hands of the Bank. The depreciation in prices is not only brought about by, say, five thousand imaginary shares being thrown on the market but by the bear recklessly selling his thou- sand shares for cash. Knowing that long. kong is a small place and that capitalists here have the bulk of their funds invested in land or otherwise he has no one to four. There is no large "bull" here to ohock or counteract his schemes. In large cities like Loudon, New York, Liverpool, &c., there are capitalists who With Dake a practice of bulling the market. such men bere no true bear could venture to sell short as freely as has been done in Hongkong. The more shares a bear, in London, say, sold short the tighter would become the grip of the bull on him. The bear is liable to be cornered. Here, however, with no bull to cope with bim the bear can play with the market as he lists. If i England it was found necessary 1.o introduce Leeman's Act to chock the operations of the bears, I maintain that it is doubly necessary to make Mr. Keswick's Bill law here where the bulls are weak and the boar ing element a strong one, while there is only one Bank stock and other stocks predominate. If those bond file purchasers of shares I have des- cribed above were left to themselves, or if they had thrown on their shoal iers only the shares the stock of a certain company represents, such shares being known and limited, when bad times come the fall in prices would never be heavy be. cause it is not in the nature of men to sacrifios; ou the contrary it is always the polley of every bolder to maintain values. When bad times nome after a season of prosperity the more shares a bear throws on the market the stronger ho becomes. The burden gradually grows greater than weak: shoulders cuu sustain, they succnmb, losses and promissory notes become the order of the day, and there is wailing and weeping in many a honsehold erstwhile happy and hopeful.
There is such a thing as the law of supply and demand. If my neighbour has 100 shares of a certain stock for sale and I come in with my 100 imaginary shares, and sell them forward at whatever price I can get I increase the supply and thus depreciate his property. There is a pun- ishment provided for the crime of sweating sovereigns, and by parity of reasoning there should be a punishment for the rime of depreci- ating stocks. I have landed property and houses.
No comments yet.
Private notes are available after approval.