Rare earth, telecom stocks lift up China markets after Xi, Huawei boost

Yujing Liu
Rare earth, telecom stocks lift up China markets after Xi, Huawei boost

China stocks climbed on Tuesday, as rare earth and telecommunication stocks led the advance following a company visit by President Xi Jinping and upbeat remarks by Ren Zhengfei, the founder of Huawei Technologies.

The Shanghai Composite Index rose 1.2 per cent to 2905.97. The Shenzhen Component Index climbed 1.9 per cent, and the ChiNext Index was up 1.7 per cent. The CSI 300 of large companies increased 1.4 per cent.

In Hong Kong, the Hang Seng Index slipped 0.5 per cent to 27,657.24.

Companies that make magnetic materials from rare earth elements surged broadly in China, extending their gains from Monday. The critical industry was thrown into the spotlight after Xi visited JL Mag Rare-Earth, a producer based in the southeastern province of Jiangxi, on Monday.

Speculations emerged that China may consider cutting its rare earth exports to the US as a way to retaliate in the trade war, even though foreign ministry spokesman Lu Kang asked the public to not “overthink”.

Explainer: Used from iPhones to guided missiles, does China’s dominance in rare earths hold potential leverage in trade war?

“China’s A-share market is a momentum-driven market after all. As long as there is something that sounds slightly good, people will speculate on the stocks,” said Kevin Leung, executive director of investment strategy at Haitong International Securities.

Investors were quick to jump on the stocks related to rare earths, even though many experts questioned the likelihood of China holding its rare earth resources as potential leverage in the trade war.

A gauge tracking 38 rare earth-related stocks in mainland China rose 7 per cent, including 15 that soared by the maximum 10 per cent – one of them is JL Mag Rare-Earth.

Rare-earth stocks in China soar after visit by Xi Jinping spotlights US dependence on key element in hi-tech products

In Hong Kong, China Rare Earth, which produces and sells rare earth oxides, gained a jaw-dropping 108 per cent, recording its largest daily increase. Universal Star Holdings, a producer of rare-earth magnetic materials, also surged 19 per cent.

Telecom stocks including equipment suppliers to Huawei also advanced in China, after the founder of the telecom giant Ren Zhengfei voiced confidence in the company under escalating pressure from the US.

Huawei founder Ren Zhengfei says clash with the US was ‘inevitable’

A gauge tracking 64 companies related to Huawei rose 1.8 per cent. ArcherMind Technology, a software developer that has long-term partnership with Huawei, surged by the daily limit of 10 per cent. DBG Technology Co, an electronics manufacturer service provider to Huawei, climbed 7.6 per cent.

In press briefing with Chinese media, Ren said he had foreseen the targeting of Huawei by the US government.

“We sacrificed ourselves and our families because we have the dream of standing on the top of the world. For this dream, we will clash with the US sooner or later,” he was quoted as saying by Chinese media.

Ren said he thought at the beginning of this year that the US government’s crackdown might come in two years, and Huawei had sufficient time to prepare for it. But the arrest of his daughter Meng Wanzhou in Canada made Ren realise that the clash may have come early, he said.

Huawei’s domestic rival ZTE also rose by 4.7 per cent in Shenzhen, after a media report cited its company official saying that China will start commercial use of 5G nationwide on October 1.

China Daily reported last week Michael Gao Wenhao, a senior manager at ZTE, told a conference in Hong Kong that China’s three major network operators will each deploy 30,000 to 50,000 base stations in some 40 cities. The launch of the commercial use of 5G is to celebrate the 70th anniversary of the People’s Republic of China, according to the report.

ZTE said in a social media post on its official Weibo account on Tuesday that the company had not make such remarks and there was misunderstanding in communication.

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