Why GameStonk Won’t Come To China By Reuters


© Reuters. FILE PHOTO: The Chinese national flag flies near the China Securities Regulatory Commission (CSRC) building in the Financial Street area of ​​Beijing

By Samuel Shen and Tom Westbrook (Reuters) – In his Hangzhou apartment in eastern China, Wen Hao had just finished his daily stock picking video when he discovered that he had been banned from the social media platform Toutiao a day later. of inviting Internet users to join his actions. -Recommending community. In a country where business activities are closely monitored and the internet censored, Wen, 35, calculated that his own lockdown showed why the massive purchases that sent US video game retailer GameStop (NYSE 🙂 stocks higher 2,000% in two weeks could never happen. in China. “It‘s okay if you have a hundred followers,” said Wen, a self-described investment adviser who live-streams his stock recommendations every day on Wechat. “But if you ask thousands of followers to buy a share at the same time via social media in China, the police will visit you.” The GameStop rally made world market headlines for the way swarms of Reddit users took on the big short sellers and hedge funds. So far, efforts to emulate that kind of drama in Asia’s idiosyncratic markets have been isolated. There was a small-scale online crusade to support Malaysia’s very short glove makers and calls in South Korea to maintain a ban on short sales. But such retail cheerleaders have struggled to attract a large following. China’s stock market once had a reputation for being a casino, but the country’s strict censorship, the absence of famous short sellers, and a general tendency not to cross state directives hamper their efforts. Dean Li, a blogger for Xueqiu.com, an investor community similar to Reddit, said that the GameStop series had shown that “if a short seller dares to hastily announce bearish bets against a publicly traded company, he will be in trouble.” . But both short selling and options trading, the key drivers of GameStop’s stratospheric rise, are restricted in China, making such a duel impossible, he said. Huang Wei, founder of an online investment community that understands what he calls “grassroots investors,” said he emphasizes with US retail investors in their “revolt” against Wall Street short sellers, but in China, not there are grounds for an uprising of retail investors. . “It‘s a clash of people’s perspective of value. It’s like a farmers’ uprising against tyranny,” Huang said. NO CHE OR MAO “There is no widespread public discontent right now … so you don’t see Che Guevara or Mao Zedong in the market,” Huang said, referring to the charismatic leaders of the Cuban and Chinese revolutions. The possibility of a Chinese equivalent of GameStop emerging has been further tempered by recent capital market reforms aimed at eliminating weak companies and encouraging long-term investment. Chinese regulators are also cracking down on price manipulation and internet stock recommendations. The China Securities Regulatory Commission’s campaign last September examined illegitimate action recommendations, also targeting “black market mouths” spreading misleading information to influence stock prices, as well as “black apps. “which attract investing clients through chat groups on social media. Chinese hedge fund manager Yuwei said the trading patterns seen at GameStop are not new to China or Hong Kong, where speculators have talked about stocks in pump-and-dump schemes. “The pattern is identical. You raise share prices and attract followers. And then, you leave your holdings to latecomers. The only difference is that you have little or no short positions (in China),” he said, adding such practices. . they have become much less common in China in recent years. Still, Nirgunan Tiruchelvam, head of consumer capital research at Tellimer, said he expected the retail frenzy to break out soon in Asia, including China. “That could be a perfect storm if you have the use of these Robinhood-like platforms, plus internet chat group broadcast, plus very short names. That would create a potent cocktail,” said Tiruchelvam, who identified stocks that include China Literature and MTR Corp as possible targets. “This is actually the beginning of a massive wave of investment behavior in this regard.”