Science & Technology

Huawei Drives China Stock Boom

Huawei Technologies is currently sparking the hottest stock trading in China.

Huawei Drives China Stock Boom

This company has become a kind of symbol of Beijing’s desire to ensure what can be described as technological sovereignty. In this context, the efforts of the mentioned brand reflect the most significant actions on the way to achieving the goal, which guarantees not only opportunities within the same industry but also provides a solid basis for the overall economic development of the country.

In early September, Huawei presented its new smartphone Mate 60 Pro. The appearance of this device on the market contributed to the activation of consumers during the slow pace of recovery of the Chinese economy. After that, a stock boom began, supported by retail volumes, as a result of which the combined value of Huawei’s 32 suppliers increased by about $34 billion, which was not prevented by a sell-off in the broader market.

Cheng Hao, fund manager of Zhejiang Feiluo Asset Management, says that the mentioned manufacturer is one of the few examples of success in the market, which is in a state that cannot be described as the best and became a kind of source of people’s confidence to the prospects for China’s economic development.

In this case, the turning point was the presentation of the Mate 60 Pro. The smartphone surpassed the status of an industry event in the scale of its significance, becoming a signal of Beijing’s significant opportunities in the technology sector, which at the same time are evidence of the high probability of the country’s successful future in the economic dimension.

The fund manager of Zhejiang Feiluo Asset Management said that the current stock trading has signs of speculation, but there is real value, which is characterized by long-term potential.

Huawei has been acting as a kind of lightning rod for a long period, reducing the level of tension in the global trade space. In May 2019, the then-President of the United States, Donald Trump, put the company on the American blacklist. Also that time Google announced the completion of cooperation with a Chinese manufacturer. This decision actually meant disconnecting Huawei smartphones from the Android operating system. For the company, this has not become something like a life stoppage, since it has been developing HarmonyOS since 2012.

Washington’s trade restrictions have become a sensitive decision for Huawei, which has limited its access to technology, reduced sales, and caused damage to the smartphone manufacturing and selling business. In China, the company received significant government support.

The Mate 60 Pro was equipped with a Chinese high-tech semiconductor. This means a kind of triumphant return of Beijing as an independent unit of activity to the smartphone market. A new Kirin 9000s chip manufactured by the Chinese company Semiconductor Manufacturing International Corp. was discovered in the Mate 60 Pro. The processor uses advanced 7-nanometer SMIC technology. This fact is evidence that Beijing is making progress in its efforts to create its ecosystem of chips.

U.S. Commerce Secretary Gina Raimondo said the U.S. has no proof of the ability of Huawei and other Chinese companies to launch mass production of advanced microcircuits for smartphones. But over time, she reported that the breakthroughs of the Mate 60 Pro manufacturer are alarming.

The high level of demand for an electric Huawei-backed car was another positive news for this company and support for faith in China’s prospects in the economic sphere.

The shares of the partner of the mentioned company, chip manufacturer SMIC, listed on the mainland of the United States, have shown an increase of approximately 12% since the presentation of the Mate 60 Pro. The securities of Huawei’s EV partner Seres Group Co. have more than doubled in price over the same period. The share price of software supplier Isoftstone Information Technology Group Co. has grown by 60% since the beginning of September.

This increase in the price of securities contrasts with the large-scale weakness of Chinese stocks against the background of such negative factors as deflationary pressure and a downturn in the real estate sector. The CSI 300 index of mainland Chinese stocks has shown a decline of more than 5% since the beginning of this year. This decline has been observed for the third year in a row.

Experts say that the solemn and enthusiastic reaction of the Chinese media and something like triumphant rejoicing on social networks about the presentation of the Mate 60 Pro have become factors influencing the growth of investor interest in firms that cooperate with Huawei. The position of this manufacturer will strengthen if Beijing decides to impose a ban on the use of the iPhone in government-supported organizations and state-owned companies. The media, citing insiders, report that China is studying the possibility of introducing this restriction. At the official level, this information has not yet been confirmed.

The press secretary of the Ministry of Foreign Affairs of China, Mao Ning, said at a press briefing in September that there are no laws in the country prohibiting the purchase of Apple devices and other foreign brands. At the same time, she reported an increase in the number of cases of security problems when using Tim Cook’s company smartphones. This statement may be a kind of hint at the existence of grounds for limiting the scope of iPhone use. But this is one of the possible interpretations of Mao Ning’s words, which has no guarantees of authenticity.

Previous equity drivers in the Chinese stock market, including Internet giants such as Tencent Holdings, are looking to find new growth opportunities that can interest investors. For a volatile market dominated by retail, artificial intelligence, and government reforms have not become the foundation for long-term growth.

Fanwei Zeng, an analyst at GAM Hong Kong, says that supplier companies have not yet seen significant growth due solely to cooperation with Huawei. The expert also predicts that investors will most likely lose interest in the mentioned company after they find more relevant areas of development.

Currently, some analysts assess Huawei’s sustainability potential and the duration of success as something that depends on the brand’s actions. If the products are popular and like Mate 60 Pro become a large-scale event, the company will conquer new heights of well-being. Huawei is currently working with partners to create new electric vehicles and continues to manufacture tablets, smartphones, wearables, and smart TVs.

The difficult situation in the relations between Beijing and Washington may become a kind of positive factor for the mentioned company. Shen Meng, director of the Beijing-based investment bank Chanson & Co, says that interest in Huawei will remain at a high level amid continued geopolitical tensions between the United States and China and during the negative state of affairs in the Asian country’s economic system. The expert noted that few Chinese companies receive the same attention and have the same scale of publicity.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.