A Baogang Rare Earth factory. (Internet photo)
Behind the surges in the stock price of the Inner Mongolia-based Baogang Rare Earth are government policies that the company's research institute has helped draft, as the company's stock climbed from a low of 5.66 yuan (US$0.89) to nearly 100 yuan (US$15.79) in the past three years, the Guangzhou-based Southern Weekly reports.
"As long as you understand the direction of rare earth policy, it's very easy to make money," the former owner of a metal trading company told the newspaper.
The first surge in the company's stock price, the newspaper said, occurred when the Chinese government began regulating the rare earth industry at the end of 2008. These measures allowed China greater pricing power in rare-earth minerals. The country's rare earth output accounts for 95% of the world's supply.
With rare earth prices rising as a result of the new regulations, the stock price of Baogang Rare Earth on the Shanghai Stock Exchange also grew, peaking at 96.3 yuan (US$15.21) per share on Oct. 28, 2010. Any announcement about a new policy would give a boost to the stock.
Subsequently, the stock fell to 56.71 yuan (US%8.97) before the next rally began, when the Inner Mongolia regional government introduced measures to integrate the region's rare earth firms with Baogang Rare Earth in late January 2011.
Between Jan. 26 and May 10 last year, the company's stock price grew to 99.84 yuan (US$15.76). After the stock turned ex-rights on May 13 that year, its price was adjusted lower to 58.18 yuan (US$9.19), but again managed to climb to 79.87 yuan (US$12.61) on June 9.
Another series of policies, including a government plan for new material industries and another plan to set up a rare earth mineral exchange in the city of Baotou, where the company is based, boosted the stock again earlier this year.
Although several rare earth companies and industry groups across the country take part in the policy-making process, Baogang enjoys greater influence, several industry experts told the newspaper.
The newspaper attributed the company's influence to its research institute, which helps draft several industry standards and even China's regulations on the entry barriers to the rare earth industry.
Baogang Rare Earth's operations are also crucial to its parent Baogang Group, the newspaper said, because the group, which holds a 30% stake in the rare earth company, operates in a steel sector with a poor recent outlook.
Both institutional and retail investors have bought shares in the company in recent years, making it an actively traded stock.