Blockchain frenzy that Xi started gets warning from state media

China’s state media said investors should avoid speculative behavior after comments by President Xi Jinping sent blockchain-related stocks surging on Monday.

“The future is here for blockchain, but we need to stay rational,” the People’s Daily said in a commentary.

More than 70 tech shares surged by the daily limit in Shanghai and Shenzhen on Monday, and Bitcoin rallied after Xi said China will increase investment in blockchain technology. The frenzy cooled yesterday, with the Shenzhen Stock Exchange Information Technology Index losing as much as 1.4%. Bitcoin was 2.1% lower at $9,260.

Regulation for blockchain need to be improved as the technology is still at an early stage, according to the People’s Daily commentary, which was published on the WeChat account of the paper’s opinion department. Technical innovations on blockchain aren’t the same as speculative trading of virtual currencies, it said.

“The message is clear — companies should focus on their main business and not jump on the blockchain bandwagon,” said Sun Jianbo, president of China Vision Capital Management. “It’s a warning that support for the sector does not equal an endorsement of speculative trading.”

China’s exchange operator also weighed in, sending inquiries to at least four firms whose shares jumped 10% Monday, including MYS Group Co. The companies were asked to spell out their involvement in blockchain technology and warn investors of the many risks that could affect their share price.

Chinese investors are no stranger to speculative trades — so far this year they’ve chased stocks linked to the next generation of telecom network 5G, industrial cannabis and hog breeders. While these stocks often offer some quick gains, the stakes are just as high once the trades unravel quickly.

State-controlled newspapers often run market commentary when moves get extreme, with a hugely profitable sneakers trade drawing their attention just this month. Their front pages can also signal Beijing’s support for the market: in February, newspapers highlighted the growing bull case for Chinese shares, adding fuel to the stock rally. Bloomberg