NZ brokers urge caution, education
WELLINGTON: Sharebrokers are focusing on educating clients in the aftermath of the GameStop incident, which saw the price of shares in the USbased bricks and mortar retailer skyrocket at the expense of institutional investors.
The head of direct wealth at New Zealand brokerage firm, Jarden, Fiona Mackenzie, said investors needed to understand the risks involved in taking part in this type of stock market activity, which was best described as speculative.
"The volatility we're currently seeing with GameStop's share price is reminiscent of what we saw during the dotcom bubble," she said, adding the growth of online retail investing had massively amplified speculative investment.
"While it's fantastic that shares are becoming more accessible, it's also vital that investors get comprehensive, highquality information before
committees said yesterday they will hold hearings on the stock market after the ‘‘Reddit rally’’.
‘‘We must deal with the hedge funds whose unethical conduct directly led to the recent market volatility and we must examine the market in general and how it has been manipulated by hedge funds and their financial partners to benefit themselves while others pay the price,’’ said Representative Maxine Waters, a Democrat who heads the House panel.
Waters added the hearing will focus on ‘‘short selling, online trading platforms, gamification and their systemic impact on our capital markets and retail investors’’.
‘‘We’re done letting hedge fund billionaires treat the stock market like their personal playground, then taking their ball home as soon as they lose,’’ said US Representative Ro Khanna, jumping into investing.
"A handy way to think of it is like buying a house — you'd get all the necessary checks done before putting the money down, and the same goes for investing in shares."
The general manager of the New Zealand share app, Hatch, Kristen Lunman said the GameStop investment behaviour was not typical of the activity normally seen by its customers, with some 99%of investors looking for longterm investments.
"So what I think is happening, this is actually an activist movement," Lunman said, adding the apps had made it easy for small investors to actively trade shares.
"These apps have democratised access and you will have a very small percentage of people who opt to exhibit behaviours like this, partly potentially to benefit from volatility of a given share, but also to join, you know, activist movements like this,
who noted that hedge funds were allowed to continue trading stocks while individuals were handicapped by trading limits on Robinhood.
Ideologically opposed politicians Democrat Alexandria OcasioCortez and Republican Ted Cruz were among a growing number of lawmakers who agreed Congress needed more information.
OcasioCortez, a member of the US House of Representatives, tweeted the restriction was ‘‘unacceptable,’’ adding Congress needed to know more about the move ‘‘to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit’’.
‘‘People on Wall Street only care about the rules when they’re the ones getting hurt,’’ said Senator Sherrod Brown, the incoming Banking committee chairman. which may become more prevalent in the future."
Sharesies cofounder Leighton Roberts said the app was also focusing on educating customers, but was not blocking its users from trading shares in GameStop or any others.
"There's a lot of headlines around what's happening with the sheer volume — unprecedented volume of shares — so our app is actually holding up fine," he said.
Delays were a result of the interconnection with the US markets, which was a bit slow, particularly at busy times.
Meanwhile, the Financial Markets Authority said it had been following the GameStop case with interest.
"We have welcomed the new wave of retail investors to the capital markets. However, we have expressed our concerns about investors potentially spreading misinformation on social forums and following the herd into highrisk investments.’’ — RNZ