Asian regulators issue warnings amid the recent volatility in GameStop and other US stocks

4 Feb, 2021 02:23
source: Regulation Asia

Singularity Financial Hong Kong February 4, 2021 – Asian Regulators Issue Warnings as GameStop Remains in Focus (Source: Regulation Asia, bManesh Samtani)

Authorities in Hong Kong, Singapore and Korea have added to the chorus of voices from financial market regulators calling for vigilance, amid the recent volatility in GameStop and other US stocks.

On Tuesday (2 February), MAS (Monetary Authority of Singapore) and SGX RegCo (Singapore Exchange Regulation) issued a joint statement advising the public to be on heightened alert to the risks of trading in securities incited by online discussion forums and social media chat groups.

The statement points to recent activities in the US markets relating to GameStop, AMC Entertainment, BlackBerry and other stocks, suggesting regulators have identified online discussions that may indicate possibilities for similar speculative activities in the Singapore stock market, including ‘pump and dump’ schemes that can amount to market misconduct under the SFA (Securities and Futures Act).

“Investors should make sure they refrain from conduct that could infringe the SFA,” the statement said. “Firm action will be taken against those who breach the SFA or other laws and regulations. MAS and SGX RegCo are closely monitoring market activities for signs of false trading or other forms of misconduct.”

A day later, Hong Kong’s SFC (Securities and Futures Commission) also said it has taken note of recent volatility in overseas stocks and options, cautioning investors against the risks of trading highly volatile securities, particularly if influenced by online discussion forums and social media.

The statement highlighting the risk to retail investors if brokers are forced to revise their margin levels for specific products in a short period of time, as is often required to manage risk exposures and meet settlement obligations to clearing houses and execution brokers.

On Tuesday, South Korean First Vice Finance Minister Kim Yong-beom also issued a warning against investor herd behaviour and amplified volatility that can result. “As herd behaviour like that in the GameStop case could frequently occur in a digitalised trading environment where multiple market participants easily access information, we will closely monitor its fallout,” he said.

According to reports, members of the Korea Stockholders Alliance, an advocate group of retail investors, plans to stage a ‘Kstreetbets’ movement against short-sellers in a similar manner shown in the US, where the Reddit group ‘Wallstreetbets’ delivered billions of dollars in losses to Wall Street hedge funds including Melvin Capital.

Meanwhile in Malaysia, retail investors have similarly set up a ‘Bursabets’, which has been targeting glove makers that are under short selling pressure amid doubts about their earnings prospects as Covid-19 vaccination programmes accelerate.

The SC (Securities Commission) and Bursa Malaysia issued a joint statement last Friday (29 January) warning investors against social media chatrooms that try to influence them into buying or sell certain stocks. “Investors should also be wary of discussions in these social media chatrooms that may trigger securities breaches such as the provision of investment advice or stock recommendations without a licence,” the statement said.

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