Just as Millennials and Generation Z in the United States deplored the hedge funds and short sellers that are part of the Wall Street elite, many small investors in China have complained about what they see as market exploitation by large institutions.
Mainland China’s financial markets are very different from New York’s. Short selling is highly regulated and incredibly rare, making it difficult for Chinese investors to replicate the American frenzy that increased GameStop’s stock as a way to keep the hedge funds that bet that the company’s shares would break.
Small investors often complain that they are being harvested as “leeks” – a common vegetable in the Chinese diet “- by big players robbing them of the money they think they deserve. (The government can sometimes be the target of this anger too , if the broader market is going badly.)
Chinese investors could, in theory, try to collectively raise the price of an individual stock and then discard it before institutional investors do. But this is a difficult task, given the resources and knowledge that large stock pickers have. And institutional companies that focus on long-term deals can ultimately benefit from increases in inventory.
Difficult to replicate
Dictating major market swings is “theoretically” doable for individual Chinese investors, said Kenny Tang, CEO of Royston Securities, a Hong Kong-based brokerage, due to his familiarity with using social media chat rooms to do individual stock bets.
“You can imagine that it is not difficult for some of them to come together and influence individual stocks, especially those of small businesses,” said Tang.
Analysts warn, however, that coordinated trade in a country like China, where everything is highly regulated, is fraught with dangers.
“If you get the attention of regulators, it probably won’t end well for you,” said Tang, adding that people trying to organize major market swings are at risk of being arrested if the government suspects them of manipulation of the stock market.
Others, like retail investor Luke Chen, are not really convinced of an amateur revolution in China because of the more professional knowledge established investment firms have.
“Individual investors are much less powerful than big investors in terms of capital size, investing knowledge – even some trading apps are exclusively better optimized for big investors,” said Chen, who lives in Shanghai.