INTHEBLACK September 2021 - Magazine - Page 25
“They’re the ones who usually get burned
when the bubble bursts,” he says.
“I’m not really concerned about Bitcoin right
now. Even if it crashes, it’s currently too small a
market to have any major ripples in the economy.
But you can imagine that if there was an economywide frenzy to pile into cryptocurrencies and it was
debt-fuelled, it would become a concern.”
EDUCATION VERSUS INTERVENTION
Datuk Muhamad Umar Swift CPA, CEO
of Malaysian stock exchange Bursa Malaysia
Berhad, says the increasing use of social media,
online forums and messaging applications has
led to the proliferation of “self-proclaimed
investment advisers”.
“While these conversations have helped
maintain market interest and boosted market
vibrancy, we are concerned that investors can be
misguided by individuals taking advantage of chat
rooms to promote their own agenda,” he says.
“Trading manipulation or ‘pump-and-dump’
schemes, involving the action of promoting a
stock to a certain price level or deceiving investors
by controlling or artificially affecting the price
of a security, is not acceptable and in breach of
the rules.”
Henckel describes the recent GameStop price
hike as market manipulation, rather than a bubble
in the traditional sense.
“Strictly speaking, market manipulation is
already illegal,” he says. “The rhetoric around
financial markets relies very heavily on it
being a level playing field, and when it’s not, it
compromises the credibility of financial markets
and their efficiency and fairness.
“The thing with bubbles is, should regulators
intervene and, in particular, take into account
social media?” Henckel asks. “I think it would be
really dangerous to give regulators some kind of
leeway in adjusting policy based on what they see
happening in social media. I just can’t see how that
works in a free-market economy.”
According to Swift, Bursa Malaysia is already
working to raise financial literacy levels among
Malaysian consumers, while driving retail
participation in the marketplace. “Investor
education is an important agenda for sustaining
retail activity and improving the quality of activity
through enhanced investor protection,” he says.
“Many industry analysts and academic papers
have concluded that stock market participation
rates would increase considerably if investors were
well informed and aware of their risk appetites.”
The challenge is to ensure that retail investors
are educated via credible sources, rather than the
noise of social media. Even so, Henckel suggests
that social media does not create bubbles, but rather
speeds up their growth.
“I don’t know if social media necessarily amplifies
bubbles, or increases the amplitudes of price
movements more generally,” says Henckel.
“It just makes the information travel faster.
The current cycles of Bitcoin, for example, are
remarkable. I don’t think that Tulip Mania in
17th century Amsterdam was quite that quick.”
Top left: The news of the
Dow Jones Industrial
Average falling by 300 points
on 5 August 1988 made
headlines around the world.
Centre: A GameStop store
in San Francisco, California.
Above: SpaceX owner and
Tesla CEO Elon Musk arrives
on the red carpet for the
Axel Springer Award 2020.
The award honours
personalities who are
innovative and who change
markets and shape culture.
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