US stock futures and Asian equities dropped as online brokerage Robinhood sought to restore trading in GameStop and other groups swept up in a volatility-inducing battle between retail traders and hedge funds.
Futures for the S&P 500 dropped 1.2 per cent in Asian trading on Friday following reports of the move by Robinhood, while those for the technology-focused Nasdaq Composite were down 1.4 per cent. Futures for London’s FTSE 100 slipped 1.3 per cent.
The S&P 500 on Thursday rebounded 1 per cent from Wall Street’s worst day since October after Robinhood and other retail brokers restricted trading in a number of companies whose share prices have risen sharply this week.
That move helped reduce volatility, easing pressure on hedge funds that had come under siege from traders relying chiefly on zero-fee platforms such as Robinhood to bid up shares of groups including gamers retailer GameStop into the stratosphere.
The online brokerage has scrambled to tap banks in order to shore up its capital and restore trading in GameStop and other shares targeted by hordes of retail investors. That prompted GameStop shares to rise more than 60 per cent in after-hours trading after falling 40 per cent in Thursday’s session.
“The retail horde are not going anywhere, and may have no day jobs,” said Michael Every, a global strategist at Rabobank, an investment bank. They “can pile into any stock or asset they choose, forcing brokers or regulators to shut down trading”.
Concerns over volatility also hit equity markets in Asia-Pacific, reversing earlier gains across the region. Japan’s Topix fell 1.6 per cent and South Korea’s Kospi dropped 2.7 per cent. Hong Kong’s Hang Seng swung from gains of about 1 per cent to be down 0.6 per cent.
China’s CSI 300 index of Shanghai- and Shenzhen-listed shares was down 0.4 per cent.
The Kuala Lumpur-traded shares of Top Glove, the world’s biggest maker of rubber gloves, jumped as much as 14 per cent on Friday after Reddit users called on retail investors to buy the stock. The “Bursabets” subreddit has signed up over 6,000 members since it was set up on Thursday. Top Glove has been targeted by short-sellers, which profit when a company’s share price falls.
This week’s rise in volatility has been spurred in part by a rapid rally in stocks targeted by Reddit users, which has forced some hedge funds to exit their positions.
Cboe’s Vix index, which measures implied volatility in the US market, fell back to 30 on Thursday after jumping to its highest level since November the day before.
Additional reporting by Stefania Palma in Singapore