The Chinese speculative bubble

Eastern Exchanges

Last week didn’t start well for Beijing Baofeng Technology Company. An online-video company whose products include a cheap virtual-reality headset, it saw its stock tumble twelve per cent over two days of trading, after Chinese regulators said that they were looking into possible share-price manipulation on the ChiNext board of the Shenzhen Exchange, where Baofeng trades. Still, Baofeng shareholders can’t really complain. The company went public just two months ago, and in the first thirty-four days of trading its stock rose by ten per cent every single day except one. Even after the recent stumble, Baofeng is up twenty-five hundred per cent this year. Baofeng isn’t an outlier, either. Of seventeen hundred stocks on the Shenzhen Exchange, only four have fallen this year, and more than a hundred have seen their shares rise more than five hundred per cent. The Shenzhen Index as a whole has doubled since January, and is up more than two hundred per cent in the past year. ….[READ]

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