WITH the unravelling of new investment landscape – which has to do with the new normal in the pandemic-stricken world – comes many unprecedented challenges.
The latest buzz that may require swift intervention of market regulators – notably the Securities Commission and Bursa Malaysia – for the sake of ensuring market stability is probably the Gamestock-inspired ‘long the shorts’ trend from becoming a mainstream feature.
The latest development as reported by Reuters is that Malaysian retail investors are looking to prop up the ‘ailing’ prices of medical glove makers during today’s (Jan 29) trading in an attempt to squeeze out short sellers.
Malaysian markets were closed yesterday (Jan 28) for the Thaipusam public holiday.
Shares of GameStop have surged 1,700% in just two weeks as amateur US investors piled in and forced hedge funds to lose billions on their short positions.
The WallStreetBets forum on Reddit where small investors discuss stocks anonymously is seen as having fuelled the GameStop rally.
In a new forum on Reddit called BursaBets – created just yesterday – Malaysian retail investors discussed the prospects of snapping up glove stocks while lamenting that their prices have taken a beating even as profits of glove makers have skyrocketed.
Malaysia is the world’s largest producer of medical gloves, demand for which has soared due to the COVID-19 pandemic.
“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.
“We’re gonna be fighting in our markets tomorrow,” the user said, adding that WallStreetsBets has inspired “us to bring our market back into our control”.
Discussions in the forum centered around Top Glove Corp Bhd – the world’s largest glove maker – and how short positions have dimmed its stock price.
Investors short stocks they see as vulnerable to weakness by borrowing them for a fee and selling them with the aim of buying them back at a lower price. If the stock continues to rise, they may have to buy back at a higher price.
Those betting on a rise also risk losing their investment if the price increase proves unsustainable.
Institutional investors typically drive share moves. Analysts have noted an increase in retail interest in Malaysian glove makers in the past year, though it is unclear how much of an impact any retail buying may have.
Top Glove gained 290% last year – hitting an all-time high of RM9.76 ringgit (US$2.41) per share in August – but it has since fallen nearly 40% as COVID-19 vaccines became available. It reported a record profit in December.
Investors have also raised questions about the company’s treatment of staff after over 5,000 factory workers became infected with the coronavirus.
Top Glove is not alone in seeing its stock price dipping. Shares of other glove makers – Supermax Corp Bhd, Hartalega Holdings Bhd and Kossan Rubber Industries Bhd – have also seen similar rallies and declines.
Top Glove, Kossan and Hartalega were the three most shorted stocks as of Jan. 27, according to data from the stock exchange. Supermax was in the top 10. – Jan 29, 2021
