Mass buying that sent shares in GameStop more than 2,000 per cent higher could never happen in China. Here’s why
- Short-selling and option trading, the key drivers of GameStop’s stratospheric rise, are restricted in China
- Chances of Chinese equivalent emerging also dimmed by recent capital market reforms
In his Hangzhou flat in eastern China, Wen Hao had just finished his daily stock picking video when he discovered he had been barred from social media platform Toutiao, a day after inviting netizens to join his stock recommending community.
In a country where trading activities are closely monitored and the internet censored, Wen, 35, reckoned his own blocking showed why the mass buying that sent shares in US video game retailer GameStop more than 2,000 per cent higher over two weeks could never happen in China.
“It’s OK if you have 100 followers,” said Wen, a self-styled investment adviser who live streams his stock recommendations everyday via WeChat. “But if you ask thousands of followers to buy a stock at the same time via social media in China, the police will visit you.”
GameStop’s rally grabbed world market headlines for the manner in which swarms of Reddit users took on big short-sellers and hedge funds. Efforts to emulate that sort of drama in Asia’s idiosyncratic markets have been isolated so far. There was a small-scale online crusade to support Malaysia’s heavily shorted glove makers, and calls in South Korea to retain a ban on short-selling.
But such retail cheerleaders have struggled to attract much of a following. China’s stock market once had the reputation of being a casino, yet the country’s stringent censorship, absence of famous short-sellers and a general tendency to not cross state directives stymie their efforts.
Dean Li, a blogger on Xueqiu.com, a Reddit-like investor community, said the GameStop saga had showed that “if a short-seller dares to rashly announce bearish bets against a listed company, it will be in trouble”.
