Huawei Drives $34 Billion China Stock Boom in Rare Hot Trades

Huawei Technologies Co. has established itself as the corporate symbol of China’s drive for technological self-reliance. Now the unlisted technology company is also sparking the nation’s hottest stock trades.

(Bloomberg) — Huawei Technologies Co. has established itself as the corporate symbol of China’s drive for technological self-reliance. Now the unlisted technology company is also sparking the nation’s hottest stock trades.

It started with the late-August debut of its latest smartphone, the Mate 60 Pro, which lured droves of consumers in the midst of a sluggish economic recovery. A retail-fueled equity boom followed, swelling the combined value of 32 Huawei suppliers tracked by Bloomberg by about $34 billion since the launch, defying a selloff in the broader market.

“Huawei has been one of the few bright spots, in both the market and as a watershed in boosting people’s confidence on the nation’s outlook,” said Cheng Hao, a fund manager at Zhejiang Feiluo Asset Management Co. While the stock trading shows “signs of speculation, there is real value, and it has potential for the longer run.”

The company has long been a lightning rod for global trade tensions. US trade curbs limited its access to technology, gutting its sales and dealing a major setback to its smartphone business. Meanwhile at home, Huawei — whose name is written with characters that can mean “Chinese achievement” — continued to receive solid government backing.

The Mate 60 Pro, featuring a homegrown high-tech semiconductor, is being hailed as a triumphant return to mobiles, burnishing national pride in the company. The phone is powered by a new Kirin 9000s chip that was fabricated in China by Semiconductor Manufacturing International Corp., according to a teardown of the handset that TechInsights conducted for Bloomberg News. The processor is the first to utilize SMIC’s most advanced 7-nanometer technology and suggests Beijing is making some headway in attempts to build a domestic chip ecosystem, according to the research firm. Reports in the past week of strong early demand for a Huawei-backed electric vehicle have also added to the positive news flow.

Mainland-listed shares of Huawei’s chipmaking partner SMIC have climbed about 12% since the smartphone’s launch. Huawei EV partner Seres Group Co. has more than doubled over the same period, while software supplier Isoftstone Information Technology Group Co. has jumped 60%, making them the top two performers on the MSCI Asia Pacific Index.

The big gains contrast with overall weakness in Chinese stocks amid a housing market slump and deflationary pressures. The CSI 300 Index of mainland stocks is down more than 5% in 2023, on track for a third consecutive year of losses.

Huawei’s Surprise Comeback Marks New Phase in the Tech Cold War

Positive state media headlines and a wave of patriotic celebration on social media have helped fuel feverish retail investor interest in Huawei-related companies. At the same time, China plans to expand a ban on the use of iPhones in sensitive departments to government-backed agencies and state companies, people familiar with the matter

Previous China equity drivers including internet giants like Tencent Holdings Ltd. have been struggling to find new growth opportunities that excite investors. Themes from artificial intelligence to state-owned enterprise reform failed to provide lasting boosts for the fickle retail-dominated market, leading some to caution that the Huawei-related trades could face similar fates.

“These supplier companies have not yet seen significant growth driven by Huawei,” said Fanwei Zeng, an analyst at GAM Hong Kong Ltd. “We believe investors are likely to lose interest when they find other hot topics in the future.”

What Huawei’s Comeback Says About US-China Tech War: QuickTake

How much further the theme runs may depend on Huawei’s success with upcoming product releases. The company has other EVs in the works with a number of partners, and continues to launch new tablets, smart TVs and wearables as well as smartphones.

Political risk could even be seen as an opportunity by local investors.

“Huawei sentiment is likely to stay in place as long as tensions with the US remain high and China’s economy struggles,” said Shen Meng, a director at Beijing-based investment bank Chanson & Co. “Few companies in China enjoy the same level of attention and publicity.” 

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