Chinese chip stocks gain $13 billion on Beijing stimulus talks

(Bloomberg) — Major Chinese chipmaker Semiconductor Manufacturing International Corp. led a $13 billion sector rally after investors bet Beijing would declare more policy or financial support for an industry central to its geopolitical ambitions.

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Shares of SMIC, which Washington has blacklisted over allegations it helps China’s military, rose as much as 28 percent to their highest level in four years on Monday. That took Thursday’s gain nearly 65 percent, or about $10.7 billion off its peak market value. Smaller competitors Hua Hong Semiconductor Ltd. and Shanghai Fudan Microelectronics Group Co. they also managed a combined profit of over $2 billion during this period.

The sector’s rebound reflected a broad market recovery since late September, when pledges of policy support helped revive confidence in the No. 1 economy. 2 in the world. Many investors expect Beijing — as it tries to jump-start the real estate and financial sectors — to lend a helping hand to semiconductors. Chips, the building block of technologies from AI to EVs, are at the center of a longer-term conflict with the US for geopolitical supremacy.

Investors are awaiting further policy action after Chinese leaders signaled their intention to reverse the nation’s slowing growth. Just before the week-long holiday, the government unleashed stimulus measures ranging from interest rate cuts to a pledge of up to $340 billion to support the stock market. China’s top economic planner is scheduled to brief the public on Tuesday on a package of policies aimed at boosting economic growth.

Hong Kong-listed shares have for a week been the only way to trade Chinese chip firms, as mainland markets remain closed until Tuesday. SMIC representatives did not respond to a request for comment outside normal business hours.

China, which is years behind its Western rivals in chipmaking, is pouring enormous amounts of capital into the sector. It’s on track to spend more than $142 billion by mid-2024, the Semiconductor Industry Association in Washington estimated. As part of that effort, the government has raised another $27 billion for what is known as the Big Fund to oversee the state’s investments in numerous companies, including local chipmakers SMIC and Huawei Technologies Co.

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Beijing and local governments do not disclose total funding for semiconductors, although certain companies disclose some of the subsidies they receive. Estimates vary widely because the money comes from state-backed funds, local government funding and a range of incentives and tax breaks.

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