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The surge in interest in chipmaking stocks, which had lost more
than a third of their value over the past year on valuation
concerns, came after the U.S. Senate last week passed the "Chips
and Science" Act to better compete with China.
China's semiconductor index rose 6.8% on Friday to a four-month
high, bringing the week's gains to 14.2%, the best weekly
performance since mid-2020.
Although the U.S. Chip Act would further restrict the use of
advanced U.S. technologies in China, while prodding more
semiconductor investment in the U.S, some investors interpret it
as good news for local Chinese players.
"Domestic chipmakers will have huge opportunities to replace
imported products," said Niu Chunbao, director of investment at
private fund house Wanji Asset, adding local players could see
explosive growth.
This view was echoed by Guorong Securities, which said in a note
that the U.S. Chip Act will "stimulate the development of
China's semiconductor industry".
Shares in Shenzhen China Micro Semicon Co Ltd soared 82% on
their first day of trading in Shanghai, in contrast with weaker
recent stock market debuts.
Chinese chipmaking giant Semiconductor Manufacturing
International Corp (SMIC) jumped 7.1% in Hong Kong and 4.4% in
Shanghai. The SSE STAR Chip Index surged 8.3%.
But Chinese chipmakers are expensive compared with their global
peers, at a time when the prospect of a global economic
recession threatens chip demand.
The global industry, which suffered from supply-chain snags
during the height of the COVID-19 pandemic, now faces weak
demand as inflation and recession fears reduce orders for chips
used in everything from cars to mobile phones.
China's sector trades at around 57 times earnings, and remains
the priciest sector in China's stock market.
(Reporting by Jason Xue, Samuel Shen and Brenda Goh; Editing by
Alexander Smith)
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