(Bloomberg) — China’s top chipmaker Semiconductor Manufacturing International Corp. led a $13 billion sector rally after investors bet Beijing would announce more policy or financial support for a sector central to its geopolitical ambitions.
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Shares of SMIC, which Washington has blacklisted over allegations it supports the Chinese military, rose as much as 28% on Monday to a four-year high. That knocked nearly 65% ​​off its gains since Thursday, or about $10.7 billion in market value at its peak. Smaller competitors Hua Hong Semiconductor Ltd. and Shanghai Fudan Microelectronics Group Co. also achieved combined profits of more than $2 billion during the period.
The sector rally reflected a broad market rally since late September, when policy support pledges revived confidence in the world’s second-largest economy. Many investors expect that Beijing, as it tries to boost the real estate and financial sectors, will also lend a helping hand to semiconductors. Chips, the basic building block of technologies from AI to EVs, are at the heart of a long-running conflict with the US for geopolitical supremacy.
Investors are eyeing additional policy measures after Chinese leaders signaled their intention to reverse the country’s slowdown. Just before a weeklong holiday, the government launched 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 will brief the public on Tuesday on a package of policy measures aimed at boosting economic growth.
Hong Kong-listed shares have been the only way to trade Chinese chip companies for a week 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 chip production, is pumping huge amounts of capital into the sector. It is on track to spend more than $142 billion, the Washington-based Semiconductor Industry Association estimates by mid-2024. As part of that effort, the administration has raised another $27 billion for what is known as the Big Fund to provide oversight on state investments in dozens of companies, including local chip manufacturing champions SMIC and Huawei Technologies Co.
Beijing and local governments do not disclose total semiconductor funding, although some companies do disclose some of the subsidies they receive. Estimates vary widely as the money comes from state-backed funds, local government financing and a range of incentives and tax breaks.
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