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Stocks

Market Scramble: Bitcoin fever spreads to stock market

Rising cryptocurrency prices send investors into related startups

TOKYO -- Investors are rushing into Japanese startups with exposure to virtual currencies, likely inspired by the dramatic gains in the value of bitcoin and its peers in recent weeks.

Shares in Metaps, which plans to develop an artificial intelligence-based virtual currency trading system, jumped 8.4% on Wednesday, extending its winning streak to a third day. Infoteria, which has a partnership with cryptocurrency platform developer Tech Bureau, gained 2%. Stocks in the digital currency industry contributed to a 1% rise in the Tokyo Stock Exchange's Mothers index to 1,088.10, a year-to-date best and the highest level in about 11 months.

Investment bank MBK, listed on the TSE's second section, has risen about 17% since mid-February. The steep climb has come amid growing expectations about its entry into the cryptocurrency business in Hong Kong through a partnership with virtual currency exchange operator BtcBox.

The skyrocketing value of the virtual currencies has clearly been fueling those stocks' rallies. The price of market leader bitcoin has soared 90% in dollar terms over the past month, while the value of Ethereum, the second-biggest player in terms of market cap, has roughly quadrupled. Third-ranked XRP, often referred to as Ripple, has surged more than tenfold.

These gains have ignited hopes that stocks in the industry will become "tenbaggers" -- a term frequently used by legendary investor Peter Lynch to describe an investment that appreciates to 10 times its initial purchase price. Remixpoint -- which operates a virtual currency exchange through a subsidiary -- and MBK have each doubled in price since the amended Payment Services Act, which officially placed virtual currencies within Japan's legal framework for payment methods, was approved in the Diet last May.

Long-term investors are giving a thumbs-up to financial technology stocks. A global fintech equity fund managed by Nikko Asset Management has received an inflow of some 10 billion yen ($89.4 million) this month alone, with the balance surging 80% since the end of April. This fund invests in U.S. payment services providers Square and PayPal Holdings, and had an allocation of only about 6% to Japanese stocks as of April 30. The fund is looking to ramp up its investment in Japan, said Brett Winton of Ark Investment Management, which advises Nikko.

Publicly offered investment trusts, targeting fintech, AI and autonomous driving technologies, had an asset balance of some 1.9 trillion yen as of the end of April, up 120% year-on-year, according to Deutsche Asset Management. Funds boasting high returns are drawing additional money, said Nobuyuki Fujiwara of the Deutsche Bank unit.

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