SINGAPORE (BLOOMBERG, REUTERS) - Asia's retail investors, emboldened by the meteoric rise of US videogame retailer GameStop, are taking on short sellers and making their brokers nervous enough to cut off margin lending.
In China, Futu Holdings and Up Fintech Holding, two fast-growing online brokerages that help Chinese investors trade overseas stocks, joined Robinhood Markets and other US securities firms in restricting users from buying shares of GameStop and AMC Entertainment Holdings.
New positions in the stocks were prohibited due to “upstream restrictions” but customers can still sell existing holdings, Futu said in a statement on Thursday (Jan 28). Futu, backed by Chinese tech giant Tencent Holdings, encouraged users to be “prudent” when trading such stocks. Xiaomi-backed Up Fintech, also known as Tiger Brokers, said on Friday the move is “due to compliance requirements from upstream.”
Brokerages are implementing curbs after the stocks swung wildly on orders from retail investors inspired by WallStreetBets and other online forums. GameStop soared more than 400 per cent in the first three days of this week, attracting interest from traders around the world. It tumbled 44 per cent on Thursday after brokerages began announcing restrictions, triggering a flood of angry responses from customers.
Some overseas brokerages have continued to allow trading in GameStop. South Korea’s major brokerages - Korea Investment & Securities, NH Investment & Securities, Mirae Asset Daewoo - said on Friday they don’t have plans to impose restrictions.
Webull, another retail trading platform in the US founded by Alibaba Group Holding alum Wang Anquan, also said opening and closing positions in GameStop and AMC Entertainment Holdings are unaffected.
In South Korea, small investors known as "ants" have borrowed so much money to dabble in stocks that at least half a dozen brokerages have stopped offering them leverage.
GameStop's global impact is the latest manifestation of a day-trading mania driven by amateur investors that is boosting the price of assets ranging from cryptocurrencies to new stock market listings.
"Not afraid, not flinching," said Ji-Han Kim, who works at a food delivery chain in Seoul and whose stock portfolio includes Chinese drone-maker Ehang, which he says has made him a 412 per cent return, and chip giant Samsung Electronics.
"I see it as a bubble that doesn't burst for a while."
However, this euphoria is not universal and Korea Financial Investment Association data shows six South Korean brokerages stopped margin lending this month, after loan values hit a record 21.6 trillion won (S$25.8 billion) this week.
"Any more lending to ants would go against the capital requirement ratio for brokerages," said Kwak Sang-jun, a stockbroker at Shinhan Investment Corp in Seoul.
"No-one expected the rally would be this explosive, and trading demand from retail investors would grow this explosive."
The retail phenomenon is widespread across Asia, where small-time traders have long played an outsized role, especially in markets such as South Korea and China. But investors are becoming younger, much more leveraged and influential.
In Thailand, where they are known as "moths", such investors piled into local cannabis-related stocks on Thursday (Jan 28) in anticipation of regulatory changes by the government there.
In Hong Kong, retail investors borrowed more than US$50 billion (S$66.4 billion) to buy shares in Chinese video sharing app Kuaishou Technology's float.
And in Australia and Japan, heavily shorted stocks are surging as small investors try and emulate the squeeze that has driven GameStop shares up 17-fold in little more than two weeks.
GameStop Not Over
GameStop has become the poster-stock for apparently coordinated small-investor buying, marshalled over online forums such as Reddit, and aimed at inflicting pain on big hedge funds who had bet it would struggle and its stock would fall.
It was the most-traded stock at brokers Stockal and Vested Finance in India and a tiny Australian nickel explorer with a similar ticker, GME Resources, rose as much as 50 per cent on Thursday in Sydney.
Such trades lit up market forums such as chat app Telegram, Kakao Talk in South Korea and 2 channel in Japan, as prices reacted to the retail army, though with much less of the fury of Reddit forums and much more enthusiasm for locking in gains.
"People are calling me and saying: I'm FOMO, I think I'm missing something," said Chris Brankin, CEO at TD Ameritrade in Singapore, a platform for local investors to buy US stocks.
Along with fellow retail darling AMC Entertainment, GameStop has topped volumes over last few days for Saxo Capital Markets, said its Asia-Pacific CEO Adam Reynolds, adding new account volumes are "insane", with 80 per cent of new clients under 40.
"Because they're getting better and because they're getting more confidence, it's sometimes the institutional (investors) who are getting a bit overrun," Mr Reynolds said.
Retail investors made up 67 per cent of average daily trading volume on South Korea's main Kospi market last year and a "buy everything" market has lifted it 113 per cent since March.
In Australia, funeral operator InvoCare, salmon farmer Tassal and poultry producer Inghams, all of which have short interest levels higher than 8 per cent according to regulatory data, leapt to multi month highs on Thursday.
Japan's most shorted stock, telecom equipment maker Anritsu Corp, touched a two-decade high.
For Chinese cryptocurrency entrepreneur Justin Sun, who bid US$4.6 million for a charity lunch with Warren Buffet in 2019, the GameStop party is not over.
"I'll be buying US$1 mil of US$GME tonight," he said on Twitter.
"Watch out, Asians are coming!"