The Securities and Futures Commission has been making enquiries after Friday's sharp fall in the low-priced shares, according to several anonymous brokers quoted by the South China Morning Post.
Penny shares plunged after the Hong Kong Stock Exchange announced plans to delist penny stock which trades below 50 Hong Kong cents for 30 days in a row.
"We will check if anyone has been trying to take advantage of the situation to manipulate the shares," according to a spokesman for the stock market watchdog quoted by the paper.
Target stocks
Penny stocks make up 386 of the 791 companies listed on the stock market.
About 229 of these shares fell on Friday, with about a tenth of them falling by more than 25%.
"One single penny stock had turnover of more than 50 million dollars and the rest had a combined trading volume of about 40 million dollars," the newspaper quoted a stock exchange source as saying.
"This showed there was a small amount of trading to manipulate a few penny stocks to create a panic."
Secret meeting
The South China Morning Post described a meeting of brokers who on Thursday night apparently agreed to start selling penny stocks in order to cause a panic sell-off by small investors.
The brokers had reportedly wanted to put a stop to a plan by the Hong Kong Stock Exchange to delist penny stocks that fall below 50 Hong Kong cents for 30 days in a row.
And if that had indeed been their intention, then it worked.
Over the weekend, the exchange withdrew its plan and said they would reconsider it before presenting a new one in October.
Shares in Hong Kong subsequently bounced back from Friday's falls.
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