China Stock Frenzy

Chinese gambled on gold, then home prices, then Bitcoin, now stocks. All three prior investment frenzies ended badly, how about the 4th?

Chinese Cash Pours Into H.K. Stock Market Through New Gateway

Shares of the Hong Kong bourse operator surged 9.4 percent on Thursday to the highest level since December 2007, while the benchmark Hang Seng Index jumped 3.7 percent on volumes more than three times the 30-day average for this time of day.

Mainland investors used up 9.2 billion yuan of the link’s daily quota on Thursday, while international investors were net sellers of Shanghai shares. The Hang Seng China AH Premium Index, which measures the price of mainland stocks over dual-listed counterparts, dropped 3.8 percent. The gauge still shows that mainland equities are 23 percent more expensive.

“The market is fully aware of the undervaluation of H-shares,” said James Cheng, who manages the Allianz Global Investors China Strategic Growth Fund in Taipei. “We see it as a valuable market with many undervalued, good targets.”

China Tycoons Near $50 Billion in Gains From Stock Frenzy

Another day, another billion dollars. With Hong Kong stocks surging to a seven-year high, China’s richest tycoons are approaching $50 billion in gains this year.

Take this week’s frenzy. Tencent Holdings Ltd. increased 6.7 percent since Tuesday, adding $1.2 billion to Chairman Ma Huateng’s net worth, valued at $20.1 billion as of today’s market close in Hong Kong. Wang Jianlin, chairman of Dalian Wanda Group, added about $1.2 billion to his $32.4 billion wealth, thanks to his Hong Kong-listed property unit, and closing in on China’s richest man, Alibaba Group Holding Inc. Chairman Jack Ma.

Billionaire Guo Guangchang’s wealth also gained about $850 million since Tuesday as his flagship investment company Fosun International Ltd. rose 12 percent.

Hong Kong Housewife Cheers Stocks as Workers Trade at Lunch

“Things are getting quite exciting,” said Chow Man, a 68-year-old housewife who favors Chinese banks and infrastructure stocks and says she has as much as HK$200,000 ($25,000) in play. “It’s becoming like a hobby for a lot of mainland investors to trade stocks now. That’s why more of them are taking opportunities in Hong Kong.”

...“I’m trying not to buy too much because the market will likely go down a bit and some stocks are getting more expensive,” said Juliana Lui, a government worker. “I’m staying conscious. Some people are buying stocks like they’re gambling in Macau.”

...“The rally may last for a few more days,” said the security guard, who’s hoping stocks will rise another 10 percent. “I’m just taking a lunch break to do some trading because the market is hot.”

Long-term, China continues to reform and stock valuations have not soared across the board. That said, the herd is all in and peak psychology is unfolding.