Malaysian retail investors rallied on social media to drive up stocks of Malaysian rubber glove manufacturers on Friday, in a move modeled on the GameStop trading surge witnessed in the U.S. this week.
Shares of the U.S. video game store GameStop skyrocketed from less than $20 to a peak of $492 this week after millions of amateur investors organized around the online forum Reddit to collectively send prices of the shares soaring, punishing major investors who were short-selling the store’s shares, or betting on the stock’s fall.
Short-selling occurs when an investor borrows a stock, sells it on the open market, and then buys it back to return it to a lender at a lower price, earning a profit on the difference. Short-sellers are betting that the price of the stock they sell will decrease. If a stock’s price increases unexpectedly, however, the investor is then forced to buy back the shares at a higher price, meaning a loss.
Inspired by the strategic popular action behind the GameStop share surge this week, which centered around a Reddit forum called “r/wallstreetbets,” amateur Malaysian investors on Thursday set up their own Reddit group, naming it “BursaBets” after Malaysia’s stock exchange.
A moderator of the BursaBets subreddit known as “Mod Revenant” told news site Coconuts Kuala Lumpur on Friday that he and his eight fellow moderators believe that the current value of glove industry shares in Malaysia, preyed upon by the same kind of short-selling that bet against GameStop, are too low.
“In my perspective, there is no justifying the currently low prices of our glove shares,” the moderator, who spoke on condition of anonymity, said. “If you showed this stock to anyone, they’ll understand how under-valued it is.”
Mod Revenant added that he thinks Malaysia’s stock market is “constantly being manipulated by larger financial entities.”
BursaBets members such as “Glovefan1205” are using the thread to organize “buying and holding shares from industry players such as Malaysia’s largest glove manufacturer, Top Glove,” according to Coconuts Kuala Lumpur.
“A day after Bursabets was formed and drew 6,400 members, shares of local glove-making companies rose 3 percent to 9 percent, with Top Glove leading the rise. After closing at RM6.21 (US$1.53) yesterday, Top Glove shares opened at RM7.05 [$1.74] this morning on the Bursa Malaysia stock market,” the news site reported on January 29.
Malaysia’s securities regulator and stock exchange, Bursa Malaysia, released a joint statement on Friday saying they were “closely monitoring” domestic trading after witnessing a recent rally in some U.S. stocks.
“Where warranted, the SC (Securities Commission) and Bursa Malaysia will take the necessary measures to curb disruptive trading practices and market abuse,” their statement read.
“Investors should be wary of discussions in social media chatrooms that may trigger securities breaches such as the provisions on investment advice or stock recommendations without a license,” the statement cautioned.
“Any person found guilty may be liable to a penalty of up to 10 million ringgit [about $2.5 million] or imprisonment not exceeding ten years or both,” Malaysia’s securities regulator warned.