HONG KONG, April 19 -- The global 5G race has set off a powerful rally in Chinese telecom stocks. And what we’re seeing now may just be the beginning of exceptional opportunities for savvy investors, analysts and traders say.
As countries around the world race towards a 5G future of driverless cars and wired homes, Chinese telecommunications equipment makers and suppliers are scrambling to make their mark. Chinese network operators are set to spend hundreds of billions of dollars on buying new 5G base stations over the next few years to build the next generation of telecom networks. This means massive orders for main equipment vendors to build them, with the top players – privately held Huawei Technologies and Hong Kong-listed ZTE – set to snap up the bulk of them. The money will then trickle down to their suppliers of an array of telecom components. The prospect drove a jaw-dropping 75 per cent surge in a gauge compiled by Wind of 76 China-listed, 5G-related stocks over the past six months. That dwarfs the 22 per cent rise in the benchmark Shanghai Composite Index over the same period.
One leading stock is Shenzhen-listed Wuhan Fingu Electronic Technology, which has soared 408 per cent since it said it was providing customers – its biggest client is the telecom giant Huawei – radio frequency devices to conduct 5G field trials in October. Its rival Suzhou Chunxing Precision also has jumped by 194 per cent since October after making a similar announcement. The market fervour in 5G has even led to mysterious surges in completely unrelated stocks. Shanghai-listed Eastern Communications skyrocketed 800 per cent from October to March, forcing it to make several warnings to say it was not involved in any 5G business. Traders labelled it a yaogu – “monster stock” – meaning that the surge was entirely a result of speculative capital and deviated from the fundamentals. But the real deals have plenty more room to climb, many investors and analysts say, with the market still not yet grasping what a massive growth driver 5G is to the telecom sector.