Shares in China’s biggest chipmaker dropped on Friday following reports that it would be among dozens of groups added to a US trade blacklist, capping off a turbulent week for one of the country’s tech champions.
Semiconductor Manufacturing International Corporation’s Hong Kong-listed stock dropped almost 5 per cent after Reuters reported that the US commerce department was set to add a slate of Chinese companies to the list.
The report that up to 80 mostly Chinese companies faced imminent sanctions by Washington weighed on wider investor sentiment in Hong Kong, where the benchmark Hang Seng index lost nearly 1 per cent.
Shares in SMIC have fallen more than 8 per cent this week. On Wednesday, the semiconductor company disclosed that it was “verifying” reports that Liang Mong-song, its co-chief executive, had abruptly quit.
A day earlier, global index provider MSCI said that it would delete SMIC’s shares from its benchmark equity indices, which are followed by trillions of dollars of funds, because of the group’s alleged ties to China’s military.
Donald Trump signed an executive order last month barring US investors from holding stakes in businesses with such links.
SMIC has previously been subjected to US trade restrictions. In September, the commerce department told companies that exports of critical software and chipmaking equipment to SMIC posed an “unacceptable risk of being diverted to “military end use”.
The Reuters report on Friday did not specify which other Chinese companies would be added to the so-called entity list.
The designation would mean SMIC must seek a licence from the commerce department to source components from US suppliers. Chinese companies already on the list include tech groups Huawei, ZTE and Hikvision.
The US sanctions placed on SMIC in September block the export of certain controlled items under rules concerning military end users.
“Adding the company to the entity list would have a much bigger impact because it would impose a licensing requirement on a far wider range of US-controlled goods, technology and software,” said Nicholas Turner, a Hong Kong-based compliance lawyer at Steptoe & Johnson.
SMIC is a crucial plank in Beijing’s plan for semiconductor self-sufficiency. This year, it raised $7.6bn in an initial public offering on Shanghai’s tech-focused Star market, in what was the onshore Chinese market’s biggest share sale in a decade.
SMIC’s Shanghai-listed shares were little changed on Friday.
Equity traders said that while the blacklisting did not pose an obvious additional threat to the company’s operations, the prospect of more restrictions on investing in Chinese companies was hitting sentiment.
“The more the Trump administration gets close to the final hour and the more [of these] draconian moves [there are] against Chinese corporates, the harder it is for the Biden administration to take them off,” said Andy Maynard, a trader at China Renaissance in Hong Kong.
Additional reporting by Yuan Yang in Beijing
Source: Economy - ft.com
