KUALA LUMPUR: The Minority Shareholders Watch Group (MSWG) has cautioned minority shareholders to exercise diligence and understand the risks involved when taking on institutional investors who short certain shares.
MSWG noted that in ‘bursabets’ -- a new subreddit on social news aggregator site Reddit -- Malaysian retail investors have been discussing buying up stocks of glove makers as the share prices have fallen in recent months despite these firms reporting increasing profits.
“The retail investors are looking to buy shares of medical glove makers in an attempt to drive up their prices and counter the short sellers who tend to drive the prices down. In short, they are inspired by the recent David vs Goliath battle in US firm GameStop Corp,” it said in a statement today.
Shares of GameStop have surged 1,700 per cent in just two weeks as the Main Street piled in
and forced hedge funds like Melvin Capital Management to lose billions on their short positions.
“These small investors discussed stocks on the ‘wallstreetbets’ forum on Reddit anonymously and have fuelled the GameStop rally,” it said.
MSWG said on the local front, shares of Top Glove Corporation Bhd jumped 14.33 per cent to an intraday high of RM7.10 this morning compared to the closing price of RM6.21 on Jan 27, 2021.
At the same time, Hartalega Holdings Bhd rose 10 per cent to an intraday high of RM13.42 versus the closing price of RM12.20 on Jan 27.
“MSWG would like to advise minority shareholders to exercise diligence and be aware of the risks involved in such initiatives,” it said.
In cautioning retail investors, MSWG said generally, institutional investors tend to have deeper pockets.
“This is not to underestimate the retailers’ purchasing power. At the end of the day, it may become an issue of who has deeper pockets and the stamina to sustain their initiatives,” said MSWG.
Secondly, MSWG said there may be some unscrupulous retailers including “stock market gurus” who may unload their shares after having encouraged other retailers to drive up the share prices.
“The Securities Commission Malaysia has constantly warned members of the public against dealing with unlicensed investment advisers as they could be defrauded or used as part of a market manipulation scheme.
“Eventually, such action by both parties in trying to counter each other will create volatility in the share prices and this may be a risk to the short-term investors,” it said, adding that as always, minority shareholders should make informed decisions according to their risk appetites before participating in this new game in town. - BERNAMA
