Chinese President Xi Jinping highlighted the potential of the technology underpinning digital currencies, fueling a surge in related stocks and bitcoin, which briefly topped $10,000.
Mr. Xi said China should speed up research into blockchain, the open-ledger system that cryptocurrencies rely on, according to a report released by the country’s official Xinhua News Agency on Friday after the local stock market had closed. China’s central bank has been developing its own digital currency.
Searches for “blockchain” on Chinese search engine Baidu surged by more than 40 times in two days after Mr. Xi’s comments were reported, according to a Baidu index of search results.
Bitcoin, the most popular digital currency, rallied. By midafternoon Monday in Beijing, it traded at about $9,500, according to CoinDesk, after trading just below $7,500 before Mr. Xi’s comments were made public. The price has more than doubled this year but remains below its high of near $20,000 in December 2017.
Shares of Nasdaq-listed Xunlei, a Chinese software company that offers blockchain-based services, surged by 107% on Friday, the largest single-day gain since the company went public in 2014.
An index that tracks 53 blockchain-linked stocks in mainland China rose nearly 9% on Monday. The index, with a combined market capitalization of 822.6 billion yuan ($116.4 billion), has gained more than 60% this year, according to Wind.
“It is unprecedented that China’s top leadership has elevated any technology to such a high level,” said Zhang Gang, chief strategist at Central China Securities, “It’s a big boost to market confidence.”
Various small-cap companies with stakes in cryptocurrency exchanges in South Korea—a hotbed for cryptocurrency trading—also jumped.
Beijing has previously been tough on cryptocurrencies. In 2017, the government banned cryptocurrency exchanges and fundraising through initial coin offerings to tighten controls on what it deemed risky investments. Even so, analysts have said China has been open to the benefits of using blockchain.
Many of the companies that rallied by 10%, the daily maximum gain allowed on most of China’s stock exchanges, have only dabbled in blockchain-related business in recent years. Guangbo Group Stock, a stationery producer, acquired a cross-border-payments company in 2016. Hundsun Technology, a software company controlled by Alibaba’s Jack Ma, invested in a blockchain startup called Symbiont in 2017.
Zhejiang Jingu, a steel-wheel manufacturer, said on Sunday that it had signed an agreement to work with a Chinese chip maker that is also a blockchain service provider.
Monday’s rally had more to do with speculation than expectations for growth because very few companies have been able to monetize the technology, said Wang Rui, an analyst at Shanghai Minority Asset Management, a hedge fund with 10 billion yuan in assets.
Write to Steven Russolillo at steven.russolillo@wsj.com and Stella Yifan Xie at stella.xie@wsj.com
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2019-10-28 11:32:51Z
https://www.wsj.com/articles/bitcoin-and-chinese-tech-stocks-surge-after-xi-jinping-touts-blockchain-11572259762
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