Have GameStop retail investors won?|Chan Yan-chong

2021.02.02

Recently, a game whereby individual investors beat up big investors was played out on Wall Street. In the space of 12 trading days starting from January 13, the share price of GameStop rose sharply from USD20. At one point, the price shot up to $483. Last Friday, it closed at $325, amounting to a 15-fold increase. Several short-selling companies went bankrupt and some others surrendered and close their positions. Up to this moment, retail investors have apparently won big time. But what’s next? GameStop is still a loss-making company. Over the past days, individual investors bought its shares and squeezed short sellers. Nonetheless, after the big investors have closed their short positions, how are the individual investors going to close their long positions?

Many investors are of the view that stock investors in the US are pretty insane now, given that they have pushed up the share price of GamesStop, a company that is still loss-making, and created a super bubble. In fact, short sellers have been drawn to the game because of a super bubble, too. It was just that the funds they had were outsized by those put together by the endless stream of retail investors, and so they had to surrender. Having tasted success, will retail investors manage to create another GameStop? Will people in Hong Kong follow suit and concoct its own version of GameStop and go insane like their American counterparts?

While the GameStop frenzy continues, the US stock market has been going down. As a result, the Hong Kong stock market has been affected, too. The GameStop craze has made people more wary of the stock market as they believe investors are going insane. Such is the biggest adverse effect.

In 2016, Postal Savings Bank (1658) of China was listed on the Hong Kong Stock Exchange. But the stock did not do well and so it had been on a low profile for quite some time. Not long ago, it finally drew investors’ attention after much struggling, but last year it fell again to below the issue price because of the pandemic. Recently, the stock has been rising continuously and hit a record high because renowned Chinese-born American investor Li Lu bought more than five percent of the shares.

Li is a well-known figure in the US investment circle. Some call him a disciple of celebrated investor Warren Buffett. He shot to fame some years ago after recommending BYD (1211) to Buffett. One should give credits to him based on BYD’s share price over the past few years. Of late, Li’s company Himalaya Capital has been buying the shares of Postal Savings Bank. In doing that, he must have his own reason that other people don’t see. As retail investors, we are not able to articulate on how Postal Savings Bank is different from other banks, but I trust Li.

(Chan Yan-chong, financial commentator)

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