Meitu leads declines among Chinese stocks that took wrong-way bets on bitcoin after global sell-off of digital tokens
- Meitu has lost 17 per cent in market value, mirroring the 21 per cent slide in Tesla stock amid bitcoin’s wild swings
- A gauge tracking 50 stocks linked to digital currencies sank 1.6 per cent on the Shanghai and Shenzhen exchanges
Meitu, the Xiamen-based maker of beauty applications for smartphones, tumbled by as much as 8.5 per cent to HK$1.83 in Hong Kong on Thursday. It closed 0.5 per cent lower at HK$1.99, bringing the losses this month to 17 per cent. The slide mirrors Tesla’s 21 per cent slump in the US market since April 30.
China has banned the trading of digital tokens and cryptocurrencies. A gauge tracking 50 stocks linked to digital currencies fell 1.6 per cent on the Shanghai and Shenzhen exchanges, with Shenzhen Asia Link pacing the losers with a maximum 10 per cent daily slump.
“Bitcoin is on a collision course with ESG [environment, social and governance]” values, BCA Research said in a May 15 email to clients. “Elon Musk’s flip-flop on allowing customers to pay for Teslas in bitcoin is yet another piece of evidence that ESG concerns will win out. With that in mind, we are going short bitcoin” using a technique that flips the usual risk-reward on its head, it added.
“Normally, when you short a stock, your gain is capped at 100 per cent of the initial position whereas your potential loss is unlimited. With our shorting technique, your potential loss is capped at 100 per cent, while your potential gain is unlimited. This makes shorting as an investment strategy a lot safer.”