Futu, Tiger Brokers land in ‘nerds vs Wall Street’ battle as social media users take on hedge funds over shares of GameStop, AMC
- Futu will allow trading of GameStop and AMC Entertainment shares on its platforms after wild price swings and upstream restrictions
- Brokers restricting free trading of stocks is ‘market manipulation’, analyst says
The two brokers restricted customers, mostly young traders in mainland China and Hong Kong, from buying new shares of GameStop and AMC Entertainment Holdings on the New York Stock Exchange yesterday.
“We have communicated with the upstream [dealers], [so] the trading of [GameStop] on Futu will be restored by today,” Li said in a WeChat message to the South China Morning Post. “We didn’t make restrictions, it’s our upstream security firms that made the restrictions.”
Tiger Brokers, which also barred customers from buying the two US stocks, said on Friday that the move was “due to compliance requirements from upstream,” according to a Bloomberg report.
The restrictions imposed by brokerages are akin to manipulation of the market, said Gary Ching, macroeconomic and strategy chief analyst of Guosen Securities in Hong Kong.
“If this kind of activity can be done at will by these brokerages, the market can be manipulated,” he added.
Short-sellers had been betting on the imminent decline in the stock prices of GameStop and AMC. AMC, previously owned by Dalian Wanda Group, was partly sold to Silverlake Partners for US$600 million in 2018 when the Chinese conglomerate was forced to dispose of its assets to pare debt. Wanda still owns 50 per cent of the cinema chain.
Dubbed the “nerds vs Wall Street” battle, the move generated a furore in New York, with the city’s Democratic Representative Alexandria Ocasio-Cortez calling for an investigation.
“The GameStop phenomenon is a revolutionary event and for the first time that so many small retail investors fought against institutions whose decisions sometimes were not logical, and won the battle,” Ching said. “In the future, there will be more incidents like this, and it is likely to be expanded to other markets.”
He predicted that the brokerages will relax the trading restrictions which tend to be a commercial decision, and said the price fluctuations in GameStop shares are likely to continue.
They were said to have made 13,200 transactions involving 1.69 billion shares, accounting for 23.8 per cent of the stock’s total turnover between August 10 and 12. The shares in question were worth HK$1.5 billion (US$193.5 million).
The frenzy in the US has caused a ripple effect in other parts of the world. Shares of oversold gaming stocks in mainland China surged in recent days, while heavily shorted stocks in Australia, including a company with GME as its ticker symbol, jumped as much as 60 per cent, according to Bloomberg.
“Such a phenomenon can be excluded in China” because of the 10 per cent daily price cap, and regulators can easily suspend trading when early signals emerge, Ching said. Hong Kong may be different.
“If Hong Kong sets a daily cap like in the mainland, this kind of market craziness will not happen,” he added.
