MANILA - While short selling still isn’t allowed in the Philippine Stock Exchange, the GameStop saga of retail investors outplaying wealthier institutional investors also happens in the Philippines, a stock analyst said on Wednesday.
For several days now, stock markets around the world have been rocked by small retail investors buying stocks that hedge funds bet would fall, in the process costing these short sellers billions of dollars in losses.
Short selling involves betting that a stock will fall, borrowing shares from traders and selling them on the market, with the aim of buying them back later after prices have fallen, and then returning the shares to traders. But if the stock rises, the short seller loses money.
Last week, shares in GameStop, a major video game retailer that has been financially ailing, soared after members of a Reddit group bought massive amounts of the company’s shares in protest against the hedge funds' betting on GameStop's demise.
To cover their losses, the hedge funds had to buy back, at higher prices, shares they had sold.
Miko Sayo, founder of the stock trading platform Tsupitero.com, said this happens in the country, even without short selling.
“This is actually very common in the Philippines, although we don't have a short selling facility yet here. There’s a lot of instances in the past when institutional investors were the ones selling at the bottom, and then it was the retail investors that were picking up these selling orders,” Sayo said in an interview with ANC’s Market Edge.
Sayo said one example of this was APVI or Altus Property Ventures Inc, a company that owns and operates the North Wing of Robinsons Place Ilocos mall.
Foreign funds selling were selling APVI from P15 all the way down to P8 per share Sayo said. The stock swung from a 30-day high of P32.80 per share, and closed Wednesday at P19.82.
“Retail guys made more money here than foreign funds,” Sayo said.
A US stock analyst meanwhile said he sees more of the GameStop-style stock betting in the future.
“It’s brilliant and I think we’re gonna see more of it because it’s successful,” said John Blank, chief equity strategist at Zacks Investment Research.
Amid allegations of price manipulation, Blank said he sees nothing wrong with retail investors openly discussing with millions of other small investors about what stocks they were going to invest in. He said hedge funds did the same in 2008 during the Global Financial Crisis by betting against banks and other financial institutions.
“So this game, they played it, and they never got punished for it, and rules never changed. So really in many ways, this is a kind of comeuppance for these guys and hedge funds. And frankly not a lot of people here are sympathetic for them,” Blank said.
He added that he sees nothing inappropriate about a stock getting inflated despite the company not making money, citing the example of electric car maker Tesla.
Sayo agreed that retail investors “have as much right as to push stocks as much as institutional investors.”
As the PSE mulls finally allowing short selling this year, Sayo said the stock market needs to have safeguards to protect the public against “infinite losses in short positions.”
“We’re an infant market, and maybe we need to get used to it first,” Sayo said about short selling.
He recommends limiting short selling to companies that have large capital, and to less volatile issues. After the market has become more used to this type of trading, Sayo said the PSE may expand to other issues as well.