Asian investors inspired by GameStop surge

Business

Shares of Malaysia’s Top Glove surged almost 8% on Friday as retail investors in Asia drew inspiration from the GameStop trading frenzy.

A new Reddit forum called BursaBets has been set up, describing itself as the “Malaysian version” of Wallstreetbets

The Wallstreetbets forum fuelled the GameStop share price surge this week.

Top Glove is the world’s largest producer of latex gloves, but has been hit by a Covid-19 outbreak at its factories and labour abuse allegations.

It’s unclear what effect the BursaBets forum will have because share-trading is more regulated in Malaysia than in the US.

The national stock exchange is called Bursa Malaysia.

The GameStop share-buying frenzy has been billed as a battle between Wall Street professionals and young, often novice, investors using social media platforms such as Reddit.

“Whoever is still holding gloves (has) already been through hell, join me by saying ‘eff you’ to investment banks, fund managers, market manipulators, and everyone else,” said an user called ‘Revenant‘ who started the BursaBets forum.

Unlike GameStop, which is a loss-making bricks and mortar retailer, TopGlove is a profitable business.

The Covid-19 pandemic fuelled demand for gloves, which pushed the company’s share price 290% higher last year.

Although the company reported a record profit in December, its share price has fallen 40% since August as Covid-19 vaccines became available.

Rinse and repeat?
It is not entirely clear if it will be possible for traders to emulate the GameStop “short squeeze” on the Malaysian exchange.

A short squeeze puts pressure on investors – often large funds – who are betting that the price of a particular share will fall.

Shorting involves borrowing stock, selling it off and then buying it back at a lower price and pocketing the difference.

When the share price increases dramatically, investors with short positions are forced to buy back their stocks at a loss in order to prevent further losses.

In the case of GameStop, investors organising on Reddit pushed shares prices up from less than $20 to more than $480, before a number of share trading platforms restricted activity on GameStop shares and a dozen other securities which had seen similar activity.

Because short-selling is more tightly regulated in Malaysia than in the US, it’s less likely Bursabets investors will have a similar impact.

Other stock markets across Asia also saw the spread of the GameStop phenomenon.

In South Korea, small investors known as “ants” have borrowed so much money to dabble in stocks that a handful of brokerages have now stopped offering them financing.

On Thursday Japan’s most shorted stock, telecom equipment maker Anritsu Corp, touched a two-decade high.