China’s blockchain stocks are missing out on the cryptocurrency mania that has pushed their global peers to record highs.
A Bloomberg-curated basket of seven key Chinese A-share stocks with ties to the blockchain technology underpinning cryptocurrencies -- including Shenzhen Forms Syntron Information Co., Shenzhen Ysstech Info-Tech Co. and Brilliance Technology Co. -- has fallen about 16 per cent so far this year, according to data compiled by Bloomberg. That compares with a 36 per cent rise in an Elwood Asset Management index tracking global blockchain-linked shares.
“Not every company will stand out in the blockchain sector,” said Reo Liao, a market analyst with IG Australia. “The recent surge in Bitcoin price may suggest that digital currency and digital-asset trading platform concepts will be the ones that attract all investors. That’s why we see all related stocks climb these days.”
Global crypto stocks have surged as Bitcoin more than quadrupled in value over the past year, with the Elwood index tracking blockchain-linked shares hitting an all-time high this month. But after successive crackdowns on the industry, including a ban on transactions between fiat and cryptocurrencies in 2017, China lacks a cohort of local stocks tied to digital coin exchanges and trading platforms.
Even domestic firms which have worked with Chinese regulators, such as Huobi Group, are listed in Hong Kong, while some of the biggest China-based miners have chosen a U.S.-listing. Canaan Inc. has more than doubled over the last 12 months, and Ebang International Holdings Inc. has jumped over 30 per cent since its mid-2020 listing.
Chinese firms like Syntron and Ysstech are working elsewhere in the crypto field, developing blockchain technology for various business applications, Liao said. Others work in security tools and banking machines.
“These companies have lots of diversification in other areas,” he said. The stocks that have rallied “have high focus on digital currencies. They are more sensitive to the Bitcoin price movement.”
Elsewhere in Asia, crypto stocks tied more closely to Bitcoin are booming. Monex Group Inc. in Japan and BC Technology Group Ltd. in Hong Kong have more than doubled in value in the past year, while Korea’s Woori Technology Investment Co. has surged more than 70 per cent.
The gains are even more massive in the U.S., where crypto miner Marathon Patent Group Inc. has surged more than 3,000 per cent in the past 12 months.
China’s cryptocurrency landscape is further complicated by the central bank’s development of the digital yuan at the same time as authorities restrict the wider industry, leaving investors following the government’s lead.
“For the most part, retail investors in China follow the ‘supreme leader’ mode when it comes to out-of-the-norm investment structures,” said Stephen Innes, chief global market strategist with Axi.