Chipmakers jump on Pelosi's Taiwan visit

Chipmakers jump on Pelosi's Taiwan visit

Chinese chipmakers' shares jumped by the most in two years this week as House Speaker Nancy Pelosi visited Taiwan and heightened tensions with the U.S. driving patriotic bets on a sector Beijing sees as a key to its rivalry with Washington.

After the U.S. Senate passed the Chips and Science Act to better compete with China, a surge in interest in chipmaking stocks, which had lost more than a third of their value over the past year due to valuation concerns.

The week's gains to 14.2%, the best weekly performance since mid- 2020, came to a four month high on Friday, as China's semiconductor index rose 6.8% to a four-month high.

Some investors think it is good news for local Chinese players because of the U.S. Chip Act, which would restrict the use of advanced U.S. technologies in China, while prodding more semiconductor investment in the U.S.

Niu Chunbao, director of investment at private fund house Wanji Asset, said local players could see explosive growth as domestic chipmakers will have huge opportunities to replace imported products.

In a note by Guorong Securities, the U.S. Chip Act will promote the development of China's semiconductor industry Shares in Shenzhen China Micro Semicon Co Ltd increased 82% on the first day of trading in Shanghai, in contrast to the weaker recent stock market debuts.

Semiconductor Manufacturing International Corp SMIC jumped 7.1% in Hong Kong and 4.4% in Shanghai. The SSE STAR Chip Index went up 8.3%.

Chinese chipmakers are expensive compared to their global peers, at a time when the prospect of a global economic recession threatens chip demand.

The sector of China trades at around 57 times earnings, and remains the priciest sector in China's stock market.