China’s Army of Small Investors Want to Enter GameStop Mania

China’s Army of Small Investors Want to Enter GameStop Mania

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Talks about the epic boom of the video game have taken over Chinese social media and the striking gains in stock and others have become the envy of the country’s young day traders. They are now appealing to each other to work together to emulate their American counterparts to increase the share prices of struggling companies.

Just as Millennials and Gen Zers in the United States lament the hedge funds and short sellers who are part of the Wall Street elite, many small investors in China have cried foul about what they see as the exploitation of the market by the big institutions.

The financial markets of China in China are very different from those of New York. Short sales are highly regulated and incredibly rare, making it difficult for Chinese investors to reiterates US madness pushing GameStop shares as a way to keep it at hedge funds that bet the company’s stock would crash.

Yet everyday investors in China have a major influence on market activity. There are more than 177 million retail investors, or individual traders, in China. According to December statistics, it is 99% of the investor base by the China Securities Depository and Clearing Corporation. And they also have their grievances.

Mom-and-pop investors often complain that they are being harvested like ‘leeks’ – a common vegetable in the Chinese diet – by the big players who cheat them out of money they think they deserve (the government can sometimes be the target of this anger even if the broader market performs poorly.)

“It’s so great,” wrote another Weibo user, referring to the GameStop saga. “The ‘leeks’ from all over the world must unite everyone.”

Chinese investors can, in theory, try to push up the price of an individual stock collectively and then plunge before institutional investors do. But it’s a big order, given the resources and knowledge that big-time stock voters have. And institutional enterprises that focus on long-term transactions can ultimately benefit from stock increases.

Hard to repeat

The fact that Chinese market investors can dictate the biggest swing of the market, says Kenny Tang, CEO of Royston Securities, a brokerage firm in Hong Kong, because they are familiar with the use of social chat rooms to place bets on individual stocks.

“You can imagine that it is not difficult for some of them to have an impact on individual stocks, especially small capitalizations,” Tang said.

China is no stranger to the volatility in the market driven by insane trade. When the Nasdaq-style Star Market launched in Shanghai in 2019, local investors helped some of the stocks soar. Shares in one company rose 400% on the first day of trading.
The Chinese government and state media are also well aware of how the individual investors can drive shares. State media, for example, have asked local investors to pour money into the market this past summer as the economy recovered from the coronavirus pandemic. When it appeared that the protest was moving too fast, some news agencies called back a bit and encouraged more conservative trade.

However, analysts warn that coordinated trade in a country like China, where everything is tightly regulated, is fraught with danger.

“If you get regulators’ attention, it probably won’t end well for you,” Tang said. He added that people trying to organize big swings in the market would be arrested if the government suspected them of stock market manipulation.

Others, like the small investor Luke Chen, do not really sell the idea of ​​an amateur revolution in China, because of how much more professional knowledge the established investment firms possess.

“Individual investors are less powerful than large investors in terms of capital size and investment knowledge – even some trading programs are exclusively better optimized for large investors,” Chen said.

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