Inside the Orchid Speculation: Buying and Selling to Oneself to Drive Up Prices

    From a dramatic surge to a dramatic crash, the orchid market has gone through an astonishing cycle of boom and bust. As we saw earlier, the comings and goings of speculators are an important factor behind orchid price fluctuations, so how exactly do these speculators manipulate the orchid market?

    Mr. Liu was formerly a trader at a securities company in Kunming. When the orchid market was booming, his friends once urged him to join the ranks of orchid speculators. But after a careful investigation, Mr. Liu ultimately abandoned the idea. Mr. Liu told reporters that he could only say that first, it is not scarce; second, it can be regenerated; and third, its bubble is too serious.

    Although Mr. Liu gave up speculating in orchids, his friends still put huge amounts of money into the orchid market. Mr. Liu said, I know my friend once put in 40 million, and then because he took out bank loans and mortgaged all his family assets for loans, it still was not enough. At the same time, he also attracted many nearby bosses who ran businesses to join together in speculating in orchids. In the process of speculating in orchids, they evaluated the orchids, exchanged views, assessed the value of a certain type of orchid, and then spread it through the market. After spreading it, for example, what value a certain kind of orchid should be worth, they created an effect and made them rush to grab the things, and then they began to sell step by step. This whole series of actions involved speculation.

    Mr. Liu told us that one of the most typical methods of orchid speculation is for several well-funded market makers to put in millions or tens of millions in capital and join forces to corner the market. For example, the market makers buy a batch of orchids at 30,000 per seedling, then offer them for sale at 50,000 per seedling. After the partner market makers buy them back, they then sell them to another market maker at a high price of 100,000. In the continuous process of buying and selling, and through soft media promotion, they attract other investors to follow the trend and buy in, causing the price of one or several orchid varieties to soar. And when these hot money funds withdraw after making huge profits, the sky-high orchids have no one to take them over, and the market quickly collapses.

    Mr. Liu said that previously, he knew a friend who invested in a greenhouse for growing orchids, with hardware facilities of more than 4 million. He communicated with him directly: I take the liberty of asking you, you once put in more than 50 million worth of orchids, how much are they worth now? He said at most no more than 4 million, right now, and if he tried to sell for 4 million, still no one would take them over, so 90% is gone, which is very brutal. Another orchid merchant also said that if you got them at the peak and sold them immediately, you made money. If you could not bear to sell, unwilling to part with this and unwilling to part with that, in the end they all died, and you could only be left penniless.