Can the events on Wall Street affect the financial market in Serbia?

Large investors expected the share prices of certain companies to fall, which they would earn by trading on the stock exchange. Small investors – “ordinary” people, organized to trade the shares of those same companies on Wall Street and thus raised their price, which drove the big players into huge financial losses. It is known that the scope of stock market events on the American financial market is global. Can I “shake up” the locals as well?
According to Nenad Gujanicic, a stock market analyst, the current situation on Wall Street will not have any consequences for the domestic financial market.
“When we talk about the current situation on Wall Street, there are no consequences for the domestic financial market. The domestic stock market is extremely underdeveloped, there is no mass of market participants, nor is there a range of financial instruments that are currently used in the great conflict of individual investors organized through social networks and large investment funds. The only spillover that exists refers to domestic investors who participated in trading in these shares and to stockbrokers who therefore had a larger volume of work,” says Nenad Gujanicic for the N1 portal, who is also the main broker of the broker-dealer company Momentum Securities.
Large investors “shorted” the shares – borrowed them, then sold them at one price (higher), expecting that they would fall in the future, if they were bought at a lower price and returned, and earned on the difference.
“Shortsale” (selling shares for nothing) is a trading technique by which investors bet on the fall in the price of shares, so that they do not own the targeted share but borrow it from their broker (investment bank) with the idea to buy it at a lower price, then return it to their to the broker and thus earn on the difference in price,” states Gujanicic.
As he explains – if that forecast is bad, and there is an increase in the share price, the investor must close this position by buying on the market at a higher price and thus make a loss.
“The faster the price of a stock grows, the investor who ‘shorted’ it suffers increasing losses, so he often hurries to close the position by further pushing the price on the market (he has to buy the stock on the stock exchange itself, stimulating demand). In the current Wall Street story, a crowd of individual investors ‘attacked’ stocks where funds have pronounced ‘short’ positions, leading to a strong rise in these stocks as many of those players (funds) rushed to close the position as growth was very as. That raised the value of shares several times in a very short period of time, which is a phenomenon that is really rarely seen,” Gujanicic explains.
Will the funds fail?
Gujanicic estimates that the funds involved in this game are unlikely to fail, provided that their “short” position is not extremely large.
“What is important to note is that the loss during ‘shorting’ can be extremely large, unlike the classic purchase of shares, where you can only lose as much as you invested. In ‘shorting’, if you do not close the position immediately when the stock starts to rise, the loss can be several times higher than the initial investment, in proportion to the jump in the stock price. In most cases, the funds earned during ‘shorting’, so after these events, they will be much more careful in reaching for this investment strategy,” Gujanicic estimates.
Will small investors make money?
The rational investors who got into this story, he says, have a clear motive.
“Their idea is that the funds will have to close the ‘short’ position and sell their shares to them with a profit of several hundred estimates. Of course, it is clear that only the most experienced will do this kind of work, while there will be a lot of individual investors who will jump into the game at the top of the pyramid and suffer losses in this business for a very long time,” he states.
What does this mean for companies?
According to Nenad Gujanicic, it is quite bad for the companies themselves, whose shares are traded, to have a large fluctuation in the price of shares, even when they go up, because it is obvious that their basis is speculation.
“In the long run, such companies will pay the price by limiting their ability to raise capital because it will be harder to convince investors to buy shares of this company at a certain xy price when the company decides to finance a new project. Therefore, the financing of these companies will be significantly more difficult, which is the main purpose of a company to appear on the stock exchange,” concludes Gujanicic.
What can it be?
However, Alexander Szegedi, a tax advisor, expects that such a large event will resonate far and that the impact will be global.
He reminds that large funds always contain money from smaller funds in their portfolio, among which are investment funds of banks.
“The development of the situation is still quite uncertain, but it is possible that if one or more hedge funds fail – the damage will be transferred collaterally to banks operating on the domestic market, if nothing else – and then through the value of Euribor. This directly entails the price of loans on the domestic market, which, in turn, can affect the price of raw materials, and the price,” concludes Szegedi.