BursaBets buying spree losing steam
PETALING JAYA: A group of Malaysian retail investors bandied together last Friday, trying to replicate the success of fellow investors in the United States to bring Wall Street’s short-sellers to their knees.
Unlike in the United States, where retail investors following the WallStreetBets Reddit forum triggered a buying spree across a variety of stocks, the movement in Malaysia – calling itself BursaBets – targeted listed glove makers.
The aim was to shore up glove stocks, especially the ones that have higher short sell positions.
The impact of BursaBets was nowhere close to what transpired on Wall Street.
Data provided by Bursa Malaysia, however, showed that the volume of glove stocks traded on Friday surged sharply even as the market’s overall daily volume stood moderately at 6.5 billion shares.
Top Glove Corp Bhd recorded a volume of 161.6 million shares on Jan 29 as retail investors rushed to scoop the shares of the world’s largest glove maker.
In the previous trading day, the volume traded was merely 17.82 million shares.
Similarly, this spurt in trading volume was evident across other glove stocks.
The volume traded of Hartalega Holdings Bhd surged to 14.66 million shares on Jan 29 as compared with 6.06 million shares on the previous trading day.
Supermax Corp Bhd’s trading volume rose to 45.23 million shares traded from 14.05 million shares.
Even the stock exchange’s smallest listed glove maker, Careplus Group Bhd, saw a big jump in trading volume from 8.29 million shares to 18.94 million shares.
The surge in volume, which market observers said was fuelled by retail investors, helped to push glove stock prices on Jan 29.
This was despite the market barometer FBM KLCI falling by 14.22 points or 0.9%, with 869 decliners trumping 367 gainers.
Top Glove rose by 8.53%, Hartalega jumped by 5.41% and Supermax was higher by 3.66%.
As the market enters into a new trading week, a key question is, could this surge in trading volume be sustained, especially among retail investors?
Experts think that while retail buying pressure on glove stocks may continue this week, it may begin to fizzle out.
Speaking to StarBiz, Areca Capital CEO Danny Wong (pic below) said it is unlikely for the WallStreetBets impact could be replicated in Malaysia.“The first reason is our short-selling activities are regulated and are only below 4%. Hence, the presence of short-sellers at the moment are not similar to what we see in the United States.
“The second reason is Malaysia, being an emerging market, has lower liquidity than in the United States. The US stock market has participation from global investors with greater volume and it is thus possible to pull off something like WallStreetBets, ” he pointed out.Wong added that many investors continue to be sceptical about glove stocks, despite the strong financial showings of these companies.As more countries speed up their vaccination programmes, investors are doubting the earnings prospects of glove makers.
However, Wong said investors should have some glove stocks in their portfolio, given their potential and attractive valuation currently.
“Glove stocks have long-term potential as moving forward, the awareness on hygiene and safety protocol will increase. This would increase the demand for gloves, ” he said.
Meanwhile, another analyst said the BursaBets focus appeared to be largely on Top Glove.
“There were only a few instances throughout 2020 where the daily trading volume of Top Glove surged past 100 million shares. On Jan 29, this happened again because of BursaBets.
“However, I don’t think the retail buying pressure into Top Glove can sustain because it appears that the momentum as observed from online discussions, has slowed down.
“That said, never misjudge the power of retail investors, ” he said.
According to the analyst, one major factor that led to the sharp rise in stock prices affected by WallStreetBets was due to the short squeeze.
However, he opined short-squeeze is unlikely to happen in Malaysia as the maximum allowed short position is below 4% and there is no intraday short selling.
A short-squeeze occurs when a stock experiences a sharp rise in price, forcing short-sellers to buy it in order to forestall even greater losses. Their move to buy would only further fuel the stock price’s upward movement.
https://www.thestar.com.my/business/business-news/2021/02/02/bursabets-buying-spree-losing-steam
