China hasn’t formalized a timetable for phasing out fossil-fuel powered vehicles, but the share price of the country’s top electric carmaker has soared to stretched levels anyway.
BYD Co., which counts Warren Buffett as an investor, has risen more than 40 percent over the past eight days amid optimism China’s government will speed up development in the electric-vehicle industry by phasing out fossil fuel cars and allowing wider foreign investment. BYD’s stock jumped as much as 18 percent Wednesday and its relative strength index hit 85, higher than any other member of the Hang Seng China Enterprises Index. An RSI reading above 70 signals a security is overbought, according to some traders.
Investors might have got a bit ahead of themselves, as the plans — despite showing China’s policy backing for the sector — are long-term goals and won’t boost earnings any time soon, according to Bocom International Holdings Co. analyst Angus Chan. “It’s purely sentiment driven,” he said.