Chinese Chip Stocks Gain $13 Billion on Talk of Beijing Stimulus

(Bloomberg) — Top Chinese chipmaker Semiconductor Manufacturing International Corp. led a $13 billion sector rally, after investors bet that Beijing will 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 aids China’s military, climbed as much as 28% Monday to their highest in four years. That took its gain since Thursday’s close to 65%, or roughly $10.7 billion of market value at the peak. Smaller competitors Hua Hong Semiconductor Ltd. and Shanghai Fudan Microelectronics Group Co. also managed a combined gain of more than $2 billion over the period.

The sector rally mirrored a broad market revival since late September, when pledges of policy support helped reinvigorate confidence in the world’s No. 2 economy. Many investors expect Beijing — as it tries to jumpstart the property and financial sector — to also extend a helping hand to semiconductors. Chips, the basic building block of technologies from AI to EVs, are at the heart of a longer-term conflict with the US for geopolitical supremacy.

Investors are watching for additional policy measures after Chinese leaders signaled their intent to reverse the nation’s growth slowdown. Just before a week-long holiday, the government unleashed stimulus measures from interest rate cuts to a pledge of as much as $340 billion to support the stock market. China’s top economic planner is slated to brief the public 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, because mainland markets remain closed until Tuesday. Representatives of SMIC didn’t respond to a request for comment outside of normal business hours.

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

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Beijing and local governments don’t disclose overall semiconductor funding, though certain companies reveal some of the subsidies they get. Estimates vary widely because money comes from state-backed funds, local government financing and an array of incentives and tax breaks.

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