(Bloomberg) — It’s still three months away from the Year of the Dragon, but Chinese investors are already jumping into stocks carrying the name of the auspicious mythical creature.
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Henan Taloph Pharmaceutical Stock Co. and Fujian Longxi Bearing Group Co. both jumped by the daily limit on Wednesday, among the best performers on the Shanghai Stock Exchange Composite Index. In the past month, six of the top ten gainers have the Chinese character for “dragon” in their names, Bloomberg-compiled data showed.
“2024 is the year of the dragon in the Chinese zodiac, which may be driving some of the superstitious buying,” said Marvin Chen, a strategist at Bloomberg Intelligence. “It is a risky bet if you are simply buying a stock because of the name, without any regard to fundamentals or outlook.”
Chinese investors are no strangers to trading in stocks based on their names. During the US presidential election in 2016, Wisesoft Co., whose Chinese name “Chuan Da Zhi Sheng” sounds like “Trump wins big” to Mandarin speakers, surged, while Yunnan Xiyi Industrial Co., or “Aunt Hillary,” tumbled.
In the past month, Ningbo Shenglong Automotive Powertrain System Co., an automotive parts maker, and mold manufacturer Ningbo Tianlong Electronics Co. also rallied about 200%. The Year of the Dragon — the character is spelled as Long in English — starts on Feb. 10.
The frenzy in dragon-related stocks comes at a time when Chinese equities are struggling amid concerns over the country’s economic recovery and geopolitical tension. While signs are emerging that the market may be turning a corner, the onshore benchmark CSI 300 Index is still down more than 6% this year, underperforming its Asian peers.
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Some of the companies including Tianlong have called on investors to make rational investment decisions, citing unchanged company fundamentals. “The stock price has greatly deviated from the reasonable valuation of listed companies in the same industry, as well as the company’s fundamentals,” it said in an exchange filing.
–With assistance from Mengchen Lu.
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