Oct 30, 2024 12:18 PM IST
This is not a standalone case. Chinese retail investors are known for trading in stocks based on homophones; words that sound similar to another name or phrase
Investors in China are buying into a stock which is not much known for its merits, but for its Chinese name “Chuan Da Zhi Sheng” which sounds like “Trump wins big” to Mandarin speakers, according to a Bloomberg report.
This comes less than a week before the US presidential elections.
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The software and equipment company with its English name being Wisesoft Co. saw its shares surge 30% over this week, despite the market in general sowing signs of weakness, according to the report which added that its now in overbought territory, based on its 14-day relative strength index.
Funnily, this same stock also rallied when Donald Trump won the 2016 election.
“Wisesoft’s name includes both Trump and him winning and that carries a special meaning for Chinese investors,” the report quoted Shen Meng, a director at Chanson & Co as saying.
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This comes amid election-related reports that shows positive signs for Trump, he added.
Why are Chinese investors so interested in buying such stocks?
This is not a standalone case. Chinese retail investors are known for trading in stocks based on homophones, which are words that sound similar to another name or a phrase, though the meaning won’t be the same.
An example would be retail traders going after stocks with dragon-related names while the Year of the Dragon in the Chinese zodiac came about.
However, the company has been making losses and had posted a wider net loss of 27 million yuan ($3.8 million) for the first nine months of the year compared to the same period of the previous year.
“Historically, meme stocks don’t last long in China,” the report quoted Billy Leung, an investment strategist at Global X ETFs as saying. Investors “tend to overplay it,” he added.
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