KUALA LUMPUR, Jan 28 ― Several Malaysians buoyed by the fairytale success of American amateur stock traders that helped shoot up the share price of ailing gaming retailer GameStop, have now started their own version at social aggregator Reddit, called “bursabets”.
Named after the subreddit “wallstreetbets” that shocked the titular Wall Street, the Malaysian collective of presumably stock and option traders are now calling for a rally against “institutions” and “big money” who, it founder alleged, are rigging the market to suppress share prices of local glove makers.
“Glove companies like Topglove, Supermax, Hartalega, Kossan, Comfort and a few other smaller glove producers are now all trading at criminally low PE (price to earnings ratio) of less than 15 despite earning record breaking profits because of the pandemic,” said user __Revenant__ in a new post today.
A high PE implies that investors have high expectations of what a company can achieve compared to a company with a low PE ratio.
Just created today, the subreddit now has over 1,200 members at the time of writing
Using the hashtag #gloveisgold, __Revenant__ has now asked others to join him in not lending their stocks for short-selling, or “shorting”. His post has received over 150 “upvotes” at the time of writing.
What is ‘shorting’?
Shorting is an act of betting on share prices to drop. In most cases, investors, typically hedge funds, would “borrow” these stocks, short them with the aim of buying it back when the prices go down. Investors then make profit off the price differential.
There have been allegations that big players manipulate the stock markets to send share prices down so they would know when to short.
“I want this to change. Whoever is still holding gloves have already been through hell, join me by saying eff you to investment banks, fund managers, market manipulators, and everyone else,” the user said.
“We are retailers, this is our market. Let our winners be winners. I'm not selling and I'm gonna buy more when the market opens tomorrow. I'm not gonna swim with the waves they decide. I will be holding. I believe in gloves strongly and it deserves a fair valuation.”
Over the past few months but reaching its peak media coverage the last few days, a large group of regular retail traders who banded under the subreddit wallstreetbets had set their sights against shortlisters who punted on GameStop share prices to fall.
Instead the US-based gaming retailer’s shares are now valued at around US$500 (RM2,022.91) each today, thanks to these regular traders who bought into all available GameStop shares after learning that they were being shorted.
Reuters reported GameStop’s shares have jumped by 1600 per cent, because of this unusual trading.
In comparison, bursabet’s apparent target for now is JP Morgan, the US-based investment bank that predicted the selling price of rubber gloves to drop on the back of expectation that the Covid-19 pandemic will die out soon as most governments begin to vaccinate their population.
The note, published two weeks ago, hurt local glove manufacturers causing their share prices to dip. Top Glove Corp Bhd, for example, declined 27 sen or 4.1 per cent to RM6.36, with some 27.9 million shares done, The Edge reported on January 14.
Other rubber glove makers Hartalega Holdings Bhd, Kossan Rubber Industries Bhd, and Supermax Corp Bhd also posted sharp declines after the JP Morgan note emerged.
RHB Investment Bank in a note published four days later said Top Glove Corp Bhd shares are trading at an unprecedented low price-to-earnings ratio (PE) of 4.9 times based on estimated earnings for the current financial year ending August 31, 2021.
The US investment bank had valued Top Glove’s shares at US$80 cents (about RM3.20) each at the time. The manufacturer’s shares closed at RM6.21 yesterday.
Supporters in bursabets alleged there is maligned intention behind why these shares were set so low.
But apart from the allegation and a call for retail investors to “hold” or buy more of these shares, the movement is not clear about its message or objective.
In the case of GameStop, wallstreetbets campaign had a very clear goal ― to beat the big rich Wall Street players at its own game.
Melvin Capital, the huge hedge fund that betted on GameStop’s stocks to fall, took massive losses because traders scrambling to cover these short positions and curb further losses were forced to pay inflated prices for the shares, which just made them more expensive.
A different story in Malaysia
To date it is not clear if there are traders shorting against the shares of these glove manufacturers, or if JP Morgan’s valuation would have any real short term impact on these companies.
Short selling is regulated in Malaysia, with regulated short-selling (RSS) only allowed for approved counters.
Earlier this month, Bursa Malaysia and the Securities Commission said it would uplift the temporary suspension of RSS and roll out new control measures, including daily gross short position limit of 2 per cent, and a 4 per cent cap on RSS aggregated net short position.
Top Glove Corp Bhd’s net short position, which is the sale volume of shares a trader does not own, stood at just 2.9 per cent as of January 28.
In comparison, GameStop’s short position was nearly 140 per cent, as noted by a top comment on __Revenant__’s post.
“GME has more than 140 per cent short position, Top Glove is more than 2 plus per cent net short position.
“I think there will be some small short and gamma squeeze if there’s enough buying next one to two days but dont hope for a parabolic trend,” said user brotherlone.
Another user G0LDM4N_S4CHS in one of the subreddit’s top post also pointed out the difference between the Kuala Lumpur Stock Exchange and its American counterparts, where local brokers cannot lend stocks out for short-selling.
“No we can't short squeeze Top Glove, JP Morgan is too big to fight, they ain't no ‘ikan bilis’ hedge fund,” the user said, using the Malay word that colloquially mean “minnows”.
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