China tech mania propels start-up board to record high

China's technology stock mania scaled new heights on Monday when shares in a Shanghai-listed real estate company rose by the maximum 10 per cent daily limit after it changed its name to P2P Financial Information Service Co.

The company, formerly known as Shanghai Duolun Industry, acknowledged in filings that it had not started developing a peer-to-peer lending business.

But the company estimated that an Internet domain it recently registered, www.p2p.com, was worth $100m.

The website currently features a few photos and a Chinese caption stating "This domain is worth $100m."

While Duolun is perhaps the most extreme example of the irrational exuberance for tech stocks now sweeping China's market, it is not unique.

The tech-heavy ChiNext board in Shenzhen rose 5.6 per cent on Monday to an all-time high. A total of 33 ChiNext-listed stocks hit their upper limit and the index has now risen 109 per cent in 2015.

The Shenzhen Composite index - which includes ChiNext as well as the $1.3tn Shenzhen main board and the $1.5tn Small and Medium Enterprise Board - is now up 67 per cent in 2015 compared with 34 per cent for the Shanghai Composite.

"Shenzhen shares represent the trend of economic transformation," said Li Qilin, equity analyst at Minsheng Securities in Beijing. "Just like the real estate sector in 1996 to 2010, now it's internet and telecommunications that are intimately linked to China's overall economy. That's getting investors excited."

China's bigger stock indexes also surged on Monday following an interest-rate cut announced over the weekend. The $5.5tn Shanghai Composite Index, which is tilted towards large, state-owned companies, rose 3.1 per cent on Monday.

The boom in Chinese stocks this year has been driven in large part by expectations that authorities will resort to aggressive monetary easing to cushion an economic slowdown after GDP grew at its slowest pace in six years in the first quarter.

The rate cut announced Sunday was the central bank's third since November, and most analysts expect at least one more this year. They also expect further reductions to banks' required reserve ratio, which, unlike rate cuts, directly inject base money into the banking system.

But fears of a crackdown on margin financing hit the Shanghai index, which tilts towards large, state-owned companies, last week.

Tech stocks largely escaped last week's correction, however, as loans from brokers to investors to play the markets are mostly linked to investment in large-cap shares.

"On the policy front, investors think the deleveraging push from regulators will mostly affect the big board. If you look at the list of target stocks for margin trading, it's all big companies," said an equity trader at a top-five securities broker in Shanghai.

Additional reporting by Ma Nan

Twitter: @gabewildau

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation