'We love this stock': GameStop effect spreads as calls for probe build

The battle between small-time traders and hedge funds that has shaken U.S. and European stock markets moved into Asia on Thursday, with surges in several Australian companies joining a list of social-media hyped moves that have cost financial institutions billions of dollars.

Heavily shorted Australian shares, including Webjet and Tassal Group, climbed more than 5% even as Sydney’s benchmark ASX 200 index fell 2%. [.AX]

In New York, GameStop, the video game chain at the heart of the slugfest between Wall Street and Main Street, added another 37% in early trading after a two-week, 1,700% surge that has hammered fund investors who were betting the stock would fall.

Driven by an army of individual traders who work through online brokerage apps like Robinhood.com and discuss stocks on anonymous social media messaging boards, the dramatic jump in the stock price of companies including GameStop, BlackBerry Ltd and AMC Corp drew more calls for regulatory scrutiny from commentators.

“The frenzy raises all sorts of questions with respect to possible market manipulation,” said Michael Hewson, chief market analyst at retail broker CMC Markets UK.

“It is already illegal for institutions to coordinate in the manner currently being seen in moving prices on these stocks, raising questions about the legality of what is currently taking place right now on these forums.”

The short squeeze - where traders have to abandon loss-making “short” bets on a stock falling because it has instead risen - also fueled a 2% slide in the benchmark S&P 500 on Wednesday as investors sold other assets to cover their losses.