Investors Flocked Into Shares Of China's TMT, But There Was A Threatening Risk

Investors flocked to buy shares in Chinese technology companies. (photo: dock. istock)

JAKARTA - Investors are flooding stocks of technology, media and telecommunications (TMT) in China with speculative bets on the development of chatbots that outperform other sectors amid global uncertainty. China's computer index, communications equipment, and media have surged between 29% and 35% this year, surpassing an increase of only 3.5% in the CSI 300 benchmark Index.

In recent days, including the last few days, the volume of TMT's stock trading has reached more than 40% of total market trade, according to Chinese research Merchants Securities, for record-breaking trading volume concentrations.

Investors say they buy with the hope that bots like Microsoft's ChatGPT can revolutionize the sector, cut costs and pave new avenues for growth. However, as fear lags behind attacking and developing a rally to new heights, analysts fear that profits could become unstable, and there are already signs that it is disturbing the market.

"In the stock market, AI will be an epic opportunity," said Niu Chunbao, fund manager at Wanji Asset Management, as quoted by Reuters. He fears he will miss rally and buy AI shares in recent weeks, after cutting exposure to new energy in February.

However, with the broader market increase slowing down, with doubts surrounding China's recovery power from the COVID-19 pandemic, this joy absorbs enough money to pose a wider risk. The February warning in state media did not stop the trend.

"The suction effect of the TMT sector is becoming increasingly clear," Guosheng Securities analyst said in a note, while others pointed to a seemingly shaky fundamental.

The triple increase in share price in chipmaker Cambricon Technology Corp has pushed its market value above $10 billion, although the company has reported losses since 2017. Beijing's share of Haitian Ruisheng Science Technology has also quadrupled, even as AI training data providers warn investors that it does not see the significant growth of orders brought in by AI-generated content.

"AIGC trading is clearly excessive," said Yao Pei, the main strategic at Hua Chuang Securities. However, with the Chinese government's policy of supporting technology development, some people think winners will emerge eventually, despite bankruptcy in the market first.

"Most of the companies that are soaring in excitement are junk stocks, which lack long-term value, and investment is only a Ponzi scheme," said Yuan Yuwei, fund manager at Water Wisdom Asset Management. "Dispute stocks will definitely fall, then we will see a real industry leader emerge."