Chinese Shares That Include the New Stocks Regulator's Name Are Surging
The perplexing response to his appointment by traders underscores just how hard the job will be.
(Bloomberg) -- High up on Yi Huiman’s to-do list as the new head of China’s securities regulator: professionalize the country’s $5.8 trillion stock market. The perplexing response to his appointment by traders on Monday underscores just how hard the job will be.
Chinese authorities on Saturday said Yi would run the China Securities Regulatory Commission. On Monday, companies whose names share the same Chinese character as Yi -- 易, which also means “easy” -- saw their share prices surge as investors jumped on what they saw as a good omen. Shenzhen Esun Display Co., Suzhou Etron Technologies Co. and Easysight Supply Chain Management Co. were among the beneficiaries, seeing gains of as much as 7.7 percent, 6.3 percent and 5.5 percent, respectively.
Esun and Etron closed at least 1.1 percent higher on Monday. Easysight slipped 0.1 percent.
In a market where retail investors account for an estimated 80 percent of volume, speculative trading based on names is not unusual. Wisesoft Co., whose local-language name “Chuan Da Zhi Sheng” sounds like “Trump Wins Big,” saw outsized gains after Donald Trump won the U.S. presidential election in 2016. At the same time, Yunnan Xiyi Industrial Co., or “Aunt Hillary,” tumbled 10 percent.
“Stocks with Yi in their names gained mainly due to short-term buying of speculative traders,” Zhang Gang, an analyst at Southwest Securities Co. said by phone.“We’ve seen similar pattern before with Aucma and Wisesoft.”
In October 2008, Aucma Co., whose Mandarin name of “Ao Ke Ma” is similar to that of Barack Obama, started a four-day rally of 43 percent after the third U.S. presidential debate.
It may not only be names that are pushing traders to buy the shares: users on Chinese social media noticed that Yi’s former employer, Industrial & Commercial Bank of China Ltd., has a red logo, while the branding of the firm that his predecessor at the CSRC joined from, Agricultural Bank of China Ltd., is green. In China, red denotes rising stocks prices while green means falling.
“A new leader may usher in a new era of development, a possible change of style in regulation and consequently investment style in the market,” said Zhang Gang, a Shanghai-based strategist with Central China Securities Co. “But it looks like speculative traders are fueling extended gains after the reshuffle.”
To contact Bloomberg News staff for this story: Amanda Wang in Shanghai at twang234@bloomberg.net;Lucille Liu in Beijing at xliu621@bloomberg.net;Amy Li in Shanghai at yli677@bloomberg.net
To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, David Watkins
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With assistance from Bloomberg