China stocks woo investors with new names

Chinese companies are jettisoning core businesses and reinventing themselves as tech companies - and watching their share prices rocket as they substitute gaming for the likes of coal and wood flooring.

Corporate reincarnations mirror structural shifts in the broader economy, with slower growth denting industries such as manufacturing and real estate.

Newly-minted tech companies also feed into the euphoria which has propelled the Shanghai Composite index up 115 per cent in the last year - even as the economy decelerated and industrial profits, a gauge of health in the manufacturing sector, fell by 2.7 per cent in the first quarter.

Nearly 100 Chinese listed companies last year changed their official names, mostly on the back of radical shifts in strategy, and another 40 have done so this year.

"Companies want to let investors know that they are moving away from original business and into emerging industries. It's like in the US in the 1990s when every company started calling itself dotcom," said Yao Weiwei, equity strategist at Huatai Securities in Shanghai, acknowledging that most name changes are more than just cosmetic.

Tech shares and other emerging industries have been among the biggest winners in the recent share rally. Investors expect tech firms to benefit from government policies aimed at reducing the economy's reliance on smokestack industries and promoting the services sector.

Loss-making coal miner Shanghai Ace Co demonstrates the drill. In early February it bought an online gaming company and changed its name to Shanghai U9 Game Co - and its stock price has subsequently soared by 140 per cent , even as mining assets still weigh on its balance sheet.

"On the foundation of coal mining and sales, the company's core business is expanding to include Internet gaming," the company said in a filing.

Loss-making Panda Fireworks changed its name to Panda Financial Holding in April as it announced plans to launch a peer-to-peer lending platform. Word of Panda's pending transformation appeared to leak out early, however, as its shares suddenly lept by the maximum 10 per cent for two straight days before trading was suspended on March 9.

Environmental regulations and shrinking demand had led to losses in its fireworks business.

But name changes and strategy overhauls are far from a cure-all for corporate China's woes.

Cloud Live Technology Group changed its name from Beijing Xiangeqing Group after it decided to shift out of luxury restaurants and into cloud computing. But last month Cloud Live became the first Chinese company to default on bond principal after it failed to repay Rmb402m in debt.

The high-end restaurant business has suffered amid President Xi Jinping's clampdown on lavish spending by government officials as part of a broader anti-corruption campaign.

Twitter: @gabewildau

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