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Chatbot dreams drive frenzied tech rally in China

CNA – Investors are piling into China’s tech, media and telecom (TMT) shares, with speculative bets on chatbot development crowding out other sectors in a scenario that offers a stark contrast with global caution.

Mainland China computer, communications equipment and media indexes have surged between 29 per cent and 35 per cent this year, outstripping a rise of just 3.5 per cent in the benchmark CSI 300 Index. On some days, including several last week, turnover in TMT stocks made up more than 40 per cent of total market trade, according to China Merchants Securities’ research, for a record concentration of trading volume.

Investors said they are buying in hope that bots similar to Microsoft’s ChatGPT can revolutionise the sector, cut costs and open up new paths to growth.

But as fear of missing out kicks in to extend the rally to new heights, analysts worry gains can turn unstable, and there are already some signs it is distorting markets.

“In the stockmarket, artificial intelligence (AI) will be an epic opportunity,” said Fund Manager at Wanji Asset Management Niu Chunbao who worried he was missing the rally and bought AI stocks in recent weeks, after cutting exposure to new energy in February.

A man walks by the Shanghai Stock Exchange building at the Pudong financial district in Shanghai, China. PHOTO: CNA

Data compiled by Cinda Securities showed exchange-traded funds are getting cash, too, with TMT-focussed funds drawing net inflows of CNY4 billion (USD580 million) over the past three months, among the largest such buying in any sector.

But as broader market gains falter, with doubts swirling over the robustness of China’s recovery from the COVID-19 pandemic, the frenzy is sucking up enough money to pose wider risks.

A February warning in state media has not stopped the trend. “The siphon effect of the TMT sector has become increasingly obvious,” said Guosheng Securities analysts in a note, while others pointed to fundamentals that appear shaky.

An eye-catching tripling in the share price of chipmaker Cambricon Technology Corp has driven its market value above USD10 billion, despite the company reporting losses since 2017.

Beijing Haitian Ruisheng Science Technology’s shares have quadrupled, even as the AI training data provider cautioned investors it did not see substantial order growth brought by AI generated content (AIGC).

“The AIGC trade is obviously overheated,” said Chief Strategist at Hua Chuang Securities Yao Pei. Still, with China’s government supportive of technology development, some think winners will eventually emerge, even if there is a washout in the market first.

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