Free circuit board image, public domain CC0 photo.

This week, Chinese chipmakers’ shares rose the highest in two years as House of Representatives Speaker Nancy Pelosi’s visit to Taiwan heightened tensions with the US, fueling patriotic bets on a sector Beijing regards as critical to its competition with Washington.

The increase in interest in chipmaking equities, which had lost more than a third of their value in the previous year due to valuation worries, occurred after the United States Senate enacted the “Chips and Science” Act last week in order to compete with China. 

On Friday, China’s semiconductor index (.CSIH30184) climbed 6.8 percent to a four-month high, increasing the week’s advances to 14.2 percent, the greatest weekly performance since mid-2020.

Although the US Chip Act would limit the use of sophisticated US technology in China while encouraging additional semiconductor investment in the US, some investors see it as good news for local Chinese businesses.

Guorong Securities agreed, writing in a note that the US Chip Act would “stimulate the development of China’s semiconductor industry”

Of contrast to previous poorer stock market debuts, shares in Shenzhen China Micro Semicon Co Ltd (688380.SS) jumped 82 percent on their first day of trading in Shanghai.

Semiconductor Manufacturing International Corp (SMIC), a Chinese chipmaker, rose 7.1 percent in Hong Kong and 4.4 percent in Shanghai. The SSE STAR Chip Index (.STARCHIP) increased 8.3%.

However, Chinese chipmakers are pricey in comparison to their worldwide counterparts, at a time when the likelihood of a global economic downturn threatens chip demand.

The worldwide sector, which had supply-chain issues at the peak of the COVID-19 epidemic, is now facing sluggish demand as inflation and economic worries limit orders for chips used in everything from automobiles to mobile phones.

China’s sector trades at roughly 57 times profits, making it the most expensive sector on the Chinese stock market.

Source: Reuters

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