Scour­ing so­cial me­dia for ‘tips’

Soft­ware de­vel­op­ers tap AI to scan, an­a­lyze posts on Shang­hai, Shen­zhen shares

China Daily (USA) - - BUSINESS -

More than 125 mil­lion Chi­nese use their Sina Weibo ac­counts ev­ery day to gos­sip about celebri­ties, find hip restau­rants and stay in touch with fam­ily. They also talk about stocks, and that has en­trepreneurs lis­ten­ing.

At least a dozen de­vel­op­ers are in­tro­duc­ing prod­ucts that use ar­ti­fi­cial in­tel­li­gence to scour so­cial-me­dia posts in China for com­ments about shares on the Shang­hai and Shen­zhen ex­changes. The soft­ware searches for key­words and then dis­tills its find­ings into sum­maries of whether in­vestors are pos­i­tive or neg­a­tive about par­tic­u­lar com­pa­nies.

In­di­vid­u­als com­prise the ma­jor­ity of in­vestors in China’s $6.4-tril­lion stock mar­ket, and in­sti­tu­tional traders want tools to find out which ways the re­tail crowd are lean­ing be­fore mak­ing their own de­ci­sions.

Pro­grams such as Mar­ket Mood, FinSentS and WiseEn­ter­prise that an­a­lyze in­ter­net fo­rums are part of the $1.2 bil­lion spent an­nu­ally by fi­nan­cial-ser­vices firms on mar­ket­data feeds, ac­cord­ing to con­sult­ing firm Green­wich As­so­ciates.

“If you see the Chi­nese stock mar­ket, peo­ple just re­act to any news­flow com­ing from WeChat, Weibo or any type of so­cial me­dia,” said Kevin Le­ung, di­rec­tor for global in­vest­ment strat­egy at Haitong In­ter­na­tional Se­cu­ri­ties Group Ltd in Hong Kong. “There is def­i­nitely an im­pact on stocks.”

The pro­grams also help in­vestors fol­low com­pa­ny­gen­er­ated posts on Weibo, the most pop­u­lar of China’s Twit­ter-like mi­croblog­ging plat­forms. Twit­ter and Face­book are not avail­able in China, giv­ing rise to lo­cal coun­ter­parts from Weibo Corp and Ten­cent Hold­ings Ltd, op­er­a­tor ofWeChat.

Other Chi­nese so­cial-me­dia net­works be­ing scraped in­clude Mink­abu Inc’s Caiku and East Money, which host blogs about stock trad­ing. The Shang­hai and Shen­zhen ex­changes have a com­bined 111 mil­lion in­vestor ac­counts, ac­cord­ing to China Se­cu­ri­ties De­pos­i­tory and Clear­ing Corp data. There are about 80 bil­lion so­cial-me­dia posts a year on China’s in­ter­net.

China Mar­ket Mood was de­vel­oped by Berke­ley, Cal­i­for­ni­as­tartup Pluribus Labs LLC, which al­ready of­fers a “sen­ti­ment an­a­lyt­ics” prod­uct in the US. The Chi­nese ver­sion will be re­leased this month, and the com­pany plans to open an of­fice in the re­gion by year-end, Chief Ex­ec­u­tive Of­fi­cer Frank Fre­itas said.

“The Chi­nese mar­ket is in­creas­ingly a bell­wether for moves in other mar­kets, not just in the Asian re­gion but in other re­gions,” Fre­itas said. “Given the high de­gree of re­tail-in­vestor in­volve­ment in this mar­ket, main­tain­ing a timely un­der­stand­ing of the tenor of these par­tic­i­pants can pro­vide valu­able in­sights.”

Weibo, which counts Sina Corp and Alibaba Group Hold­ing Ltd as share­hold­ers, had an av­er­age of 126 mil­lion daily ac­tive users in June —a 36 per­cent in­crease from a year ear­lier, ac­cord­ing to a com­pany state­ment.

The com­pa­nies in­ter­viewed for this story de­clined to com­ment on their rev­enue from mar­ket sen­ti­ment prod­ucts and how much they have spent on their de­vel­op­ment.

The ef­forts to scan Chi­nese in­vestor sen­ti­ment comes amid a down­turn in the main­land’s mar­kets. The bench­mark Shang­hai Stock Ex­change Com­pos­ite In­dex has fallen 13 per­cent this year af­ter a 9.4 per­cent gain in 2015.

Mar­ketMood uses a pro­pri­etary dic­tio­nary com­piled through ma­chine learn­ing to search posts for words such as bullish, bear­ish, gap and rip, Fre­itas said. The pro­gram also scans for pairs of words that denote pos­i­tive or neg­a­tive val­ues.

The soft­ware com­piles what Fre­itas calls a sen­ti­ment score. That num­ber is tal­lied for spe­cific pe­ri­ods of time to meet the re­quests of clients, who may want to tar­get cer­tain in­dus­tries.

News sen­ti­ment anal­y­sis, in­clud­ing that pro­vided by Bloomberg LP, Thom­son Reuters Corp and other news and data providers, is be­ing in­creas­ingly used by in­vestors.

Fre­itas has worked in the fi­nan­cial ser­vices in­dus­try for 25 years, in­clud­ing as chief op­er­at­ing of­fi­cer for In­stinet LLC. He helped start Pluribus Labs in 2014.

In­foTrie Fi­nan­cial So­lu­tions Pte Ltd uses its Fi­nan­cial News and Sen­ti­ment Screener, or FinSentS, to scan more than 1,000 blogs and news sources.

If you see the Chi­nese stock mar­ket, peo­ple just re­act to any news flow com­ing fromWeChat, Weibo or any type of so­cial me­dia.” Kevin Le­ung, di­rec­tor for global in­vest­ment strat­egy at Haitong In­ter­na­tional Se­cu­ri­ties Group Ltd in Hong Kong


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