Sanctioned China stocks win sudden boost from patriotic buyers

1 year ago 54

SHANGHAI/SINGAPORE : The trademark Chinese patriotism is back at play in markets. As Japan and the United States place fresh curbs on Chinese technology firms, local investors are scooping up shares of those firms and state companies, and reaping handsome rewards.

China has for years been guiding money into its innovative companies, but investors sensed an urgency for technology independence this week after the United States threatened to sanction chip maker Changxin Memory Technologies (CXMT), and Japan published rules to restrict semiconductor exports to China.

"We must choose to stand with our country ... and make long-term asset allocation in line with the country's needs," Liu Tuoqi, head of investment at Shanghai Zhangying Investment Management Co, told investors in a roadshow, describing the Sino-U.S. conflict as "irreconcilable".

But there's a silver lining in the tech spat, he added. "It forces us to make chips ourselves ... the higher the wind and waves, the pricier the fish."

Indeed, share prices of leading Chinese makers of semiconductor equipment have jumped since end-March, when Japan said it would restrict exports of 23 types of chipmaking equipment. Stocks such as NAURA Technology Group, up 14 per cent, Piotech Inc up 45 per cent, and ACM Research Shanghai Inc up 19 per cent, have led the way.

Japan this week finalised export control rules, effective on July 23, joining the U.S. in a push to curb China's ability to make advanced chips.

U.S. politicians' calls this week to sanction CXMT following Beijing's ban on U.S. chipmaker Micron Technology also boosted shares in Chinese memory chipmakers such as ZBIT Semiconductor Inc, up 26 per cent this week, and Montage Technology Co, up 4 per cent.

The nationalistic fervour boosting these select sectors and shares has also been lucrative for investors in an environment of sluggish and uneven domestic growth after China's economic reopening in January. China's benchmark stock indexes rallied in anticipation of a bumper post-pandemic recovery but have erased all gains since.

Brokerage Citic Securities said that U.S. and Japanese curbs against China's chipmaking industry will only accelerate Chinese efforts to replace foreign technology and invite stronger government support.

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