Amateur retail investors in China are driving a rally in so-called “Sino-Russian trade concept stocks” as they bet on Beijing boosting trade with Russia in an effort to soften the blow of unprecedented sanctions placed against Moscow over its invasion of Ukraine.
The frenzy is pushing little-known logistics and company valuations typically reserved for global tech groups as more and more Chinese buyers rush to purchase stocks with trade links to Russia. Stocks with even the slightest link to Russian trade are being snatched up at unseen rates, according to financial analysts.
From shipping firms to port operators, shares of more than a dozen Chinese companies with connections to Russia, or with close proximity to its borders, have soared in the past week – some by over 10 percent over the past six days.
Even as some of the corporations have warned investors that their stock is overvalued, it has not deterred Chinese buyers from what they believe to be one of the most lucrative investments.
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“The premise is that all of these would be massive gainers as a consequence of increased trade,” said the head of Asia equity strategy at one European bank, describing the rally as a “market frenzy” driven by “retail investor speculation.”
Among the top performers is Jinzhou Port, a port operator in the northeastern province of Liaoning whose shares have risen by over 80 percent since the invasion began — compared to a 3.5 percent fall for China’s benchmark CSI 300 index.
“The company’s stock price has seriously deviated from the fundamentals,” the company announced today in an exchange filing. “We specifically remind investors to pay attention to the transaction risks and make rational decisions.”
Although shares for Jinzhou Port pulled back 10 percent on Tuesday morning, they are still up by 74 percent within the past two weeks.
Similarly, Xinjiang Tianshun Supply Chain — a logistics company for wholesale goods in far northwestern Xinjiang, which directly shares a 60-mile border with Russia — also jumped by over 95 percent on the Shenzhen Stock Exchange over the past seven sessions.
Since the invasion of Ukraine began, Russian assets have become toxic for many Western investors, who see no reason to expose themselves to an unpredictable economy that could soon be in a state of complete collapse, akin to the likes of Syria or Venezuela.
Certain analysts have also anticipated that the upside to China-Russia trade will be limited by Beijing’s need to protect existing business ties with the West while side-stepping potential sanctions placed against its own economy as more international pressure racks up against it to condemn the invasion.
China and Russia to boost trade by $25 billion
The gains from this clutch of stocks come despite Beijing’s reluctance to offer financial and economic relief for Moscow, after sweeping sanctions imposed by the West delivered a punishing blow to Russia’s economy and cut off most of its key financial institutions from the rest of the world.
Beijing has also suggested it is willing to play a role in finding a ceasefire for what is now over two weeks of active combat between Ukrainian and Russian troops. But in the months leading up to the invasion, the country’s tightly controlled media outlets were filled with pro-Russia rhetoric, highlighting what Chinese officials characterized as a “no-limits” partnership between the two.
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During the first in-person meeting between Chinese leader Xi Jinping and Russian President Vladimir Putin in over two years, an agreement to boost bilateral trade by USD$250 billion per year was signed. Putin also unveiled new oil and gas deals with China worth almost USD$120 billion.
The meeting, which took place in the eve of the Beijing Winter Olympics, has resulted in much scrutiny over whether Beijing had prior knowledge of Ukraine’s imminent invasion by Russian forces and if the issue was brought up between the two leaders.
Chinese traders have latched onto government announcements that suggest official support for Moscow, such as a recent statement from Chinese customs ending all restrictions on Russian wheat imports.
However, China also faces its own economic challenges, which could make it harder for Beijing to significantly boost trade with Russia as it seeks to resolve its own internal turmoils.
“In my view, betting on a significant pick-up on China-Russia commodity trade could end in tears,” said Stephen Innes, managing partner at SPI Asset Management.