GEM

Yesterday morning we discussed the sudden crashes amid 17 small cap Hong Kong firms, which collectively lost over $6 billion in market cap, on what we dubbed was a marketwide margin call, as confidence in the entire sector vaporized instantly, sending the small cap Growth Enterprise Market (GEM) plunging by over 9%, with some stocks plunging over 90%. Quoted by Bloomberg, Francis Lun, the CEO of HK's Geo Securities said “we’re seeing a domino effect; all the companies in the same network got cut.

A few weeks ago, we reported that in a bizarre development - and the latest in a long series of red flags involving Chinese and HK stocks - various Chinese small and micro cap companies had asked employees to buy their stock while promising to cover losses" amid rising margin call pressures as the underlying stocks had been drifting lower.