SHANGHAI (Reuters) - A little-known Chinese elevator maker saw its Shenzhen-listed shares surge the maximum 10 percent on Wednesday.
The reason? The company’s name resembles that of Wang Huning, a Chinese Communist Party theoretician who was elevated on Wednesday to China’s apex of power.
The frenzied buying in Hangzhou Huning Elevator Parts Co, whose business has nothing to do with Wang, offers the latest example of the enduring influence of short-term speculators, despite regulators’ stepped-up campaign against “pump and dump” trading.
The government is introducing more foreign institutional investors, hoping they can help improve the trading culture in the country’s stock market - sometimes likened to a casino. U.S. index publisher MSCI will include China A-shares in its global indexes next year.
But Wednesday’s surge in Huning Elevator shows that many investors still pick stocks merely by name, not fundamentals.
“This is pure speculation, spurred by irrational euphoria. It has nothing to do with fundamentals,” said Yang Hai, analyst at Kaiyuan Securities.
“Heady investors who chased the stock will be burnt.”
Trading in Huning Elevator was calm in the morning, but that changed after the Communist Party revealed around midday its new Politburo Standing Committee, the country’s top policy-making body. The seven-man unit included Wang, a one-time law professor from Shanghai who has risen steadily up the party’s ranks but mostly operated behind the scenes.
When the stock resumed trading in the afternoon, a buying spree pushed it up the maximum 10 percent. It gave up some gains in afternoon trading and closed up 6 percent.
The elevator maker, which cannot be immediately reached for comment, forecast roughly flat nine-month profit on Oct. 13.
Name-based stock-picking is not uncommon in China, especially during major political events.
Last November, when news headlines pointed to a likely presidential election win for Donald Trump, shares in Wisesoft Co Ltd - whose Chinese name sounds like “Trump’s big win” - surged, while Yunan Xiyi Industrial- whose Chinese name bears resemblance to “Aunt Hillary” - slumped.
And when Barack Obama won the U.S. presidential election in 2008, speculators piled into home appliances maker Aucma Co Ltd, which sounds roughly like the Chinese pronunciation of Obama.
Some listed firms in China even took advantage of speculators’ preference for sexy names. In 2015, property developer Shanghai Duolun Industry changed its name to P2P Financial Information Services Co, in an apparent attempt to tap into investors’ mania toward fin tech at the time, triggering a surge in its shares, before the bubble burst.
Reporting by Samuel Shen and John Ruwitch; Editing by Sam Holmes