Xi Jinping’s endorsement of blockchain sparks China stocks frenzy

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Chinese investors snapped up shares related to blockchain across the board on Monday after an endorsement by President Xi Jinping of the new digital ledger technology, with more than 85 stocks gaining by the 10 per cent daily limit.

Shares in scores of tech companies with their sights on blockchain and even those of groups only tangentially related hit the 10 per cent upside limit that halts trading in Shenzhen and Shanghai.

On the Shenzhen exchange, an index of blockchain-related equities compiled by data provider Wind climbed 8.9 per cent to its highest level since April, with every one of its 52 component stocks advancing. Shenzhen’s tech-focused ChiNext index rose 2.2 per cent.

“It’s all because of Xi,” said Pan Shaochang, an equity analyst at Dongwu Securities, “but the talk around blockchain is all conceptual. There’s still a long way to go to actually bring it to fruition at an individual and enterprise level.”

Still, “the growth potential is huge”, Mr Pan said.

Government support of preferred industries in China can confer billions of dollars in cheap financing and other subsidies, and investors are always on alert for any sign of a new favoured sector.

In this case Beijing laid out its intention to foster the development of blockchain. Mr Xi called it a “core technology” requiring China-led innovation, and called for more support and investment, the official Xinhua news agency reported late on Friday.

Analysts say blockchain could help China overcome endemic trust issues by providing an unfalsifiable log of records for the supply chains of everything from vaccines to rice.

The 10 per cent surge included shares in the internet arms of state-run news agency Xinhua and the Chinese Communist party mouthpiece People’s Daily, among other non-traditional tech stocks.

The enthusiasm also reached Hong Kong, where investors sent shares in Meitu, best known for its photo beautifying selfie app, up as much as 29 per cent while Pantronics Holdings, which was acquired by Singapore-based cryptocurrency exchange Huobi Technology last year, soared as much as 62 per cent.

The price of bitcoin rose by more than 30 per cent on Friday after the Xinhua report and held most of those gains on Monday.

Nevertheless, Beijing has not indicated any relaxation of its strict ban on cryptocurrencies beyond its control, which has included shutting down exchanges and trading platforms and moving to halt cryptocurrency mining within China.

The government has instead focused on rolling out its own state-backed cryptocurrency, with one central bank official indicating that the launch would be soon.

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