China's rigid capital rules ban its citizens from investing directly in Apple Inc but that's not keeping them from seeking a piece of the iPhone maker's success by buying shares in its suppliers - and even companies rumoured to be suppliers.
Investors have flocked to the only two China-listed firms that Apple has confirmed as suppliers, sending their valuations to lofty levels, while speculation has become rife in firms thought to be indirectly doing business with the technology giant.
Suzhou Anjie Technology Co Ltd has jumped more than 30% and Warren Buffett-backed carmaker BYD Co Ltd has gained more than 15% since mid-January, when they were cited on Apple's first-ever suppliers' list. China's benchmark Shanghai Composite Index is up 5.6% for the same period.
"Investors want to share in Apple's growth as they believe sales of iPhones and iPads will remain strong," said Zhou Feng, analyst at Donghai Securities Co.
"Investing in Apple suppliers is not a bad idea, since they're the girls hanging out with the rich guy."
Shares of Apple, which is listed on the Nasdaq, hit a record high of $644.00 this month. They have since fallen 11%, closing at $571.70 on Monday, but are still up 41% in 2012.
The closest that Chinese individuals can get to owning Apple shares, given the ban on the direct purchase of overseas stocks, is to buy into one of the overseas investment funds permitted under China's Qualified Domestic Institutional Investor (QDII) scheme that have invested in Apple.
QDII is China's main channel for outbound investment by individuals in foreign capital markets.
The biggest exposure to Apple in a QDII fund is around 20%, via the Guotai Nasdaq-100 Index Fund which tracks the Nasdaq-100 Index. The fund has gained 7.3% during the past 12 months, compared with a 21% drop in China's benchmark Shanghai Composite Index.
Given their limited access, many local investors have turned to China-listed firms that directly or indirectly do business with Apple as proxies for the world's most valuable company.
Such a trading strategy is not uncommon in China's strictly controlled capital markets.
Investors use overseas REIT funds to speculate on the property market, for example, even though the performance of these products is based on the commercial rental market.
Suppliers of suppliers
The hunt for exposure to Apple has at times taken Chinese investors to the far periphery of Apple's supply chain or deep into the realm of rumour and speculation.
Shares of Success Electronics Ltd, which makes touch screens and has been cited by domestic media and analyst reports as an Apple supplier, nearly doubled in February on expectations of the imminent launch of the iPad 3.
Nanjing Yunhai Special Metals Co, which domestic media and analysts have said provides raw materials to suppliers of iPad and iPhone components, surged 35% in the fourth quarter of 2010, following the launch of the iPhone 4 earlier in the year. Its shares have since fallen back, however, and the company barely made a profit in 2011.
But analysts believe that Anjie, with its proven and direct relationship with Apple, can continue to perform well, even with its high valuations.
The company last week forecast that first-half profit this year may grow as much as 70%, after surging 82% last year to 101 million yuan.
"You can hold on to Anjie as long as you have faith in Apple," said Wu Binhua, analyst at Hwabao Securities. "But too much reliance on one single customer is also a potential risk."
Asset managers including China Asset management Co and Yinhua Fund Management Co boosted their holdings in Anjie during the first three months of this year, the company's first-quarter earnings report showed.
"It's possible that the Apple suppliers list has generated more investor interest in us," said Ma Yuyan, an investor relations official at Anjie, which makes components used in iPhones and generates about half its revenue from Apple.
Sixteen potential investors, including Haitong Securities Co, Bank of China Investment Management Co and HFT Fund Management Co, a fund venture of BNP Paribas, visited Anjie in January and February, its quarterly report showed.
BYD, which makes cars and batteries, declined to detail its business with Apple, citing a confidentiality agreement. The company has yet to publish its quarterly results.
Anjie now fetches 35 times its 2012 earnings and BYD trades at 46 times, far above the average of 29 times for firms listed on Shenzhen's SME board, which lists small- and mid-cap companies.