The Recent Rise of Huawei-related Stocks: Is it Only Speculation?

Amidst a dismal Chinese stock market landscape, the launch of the Huawei Mate 60 series mobile phone has ignited an increase in many related stock prices. But as stocks associated with Huawei experience unprecedented surges, one must ask: are these "Huawei concept stocks" genuinely promising, or are they merely a result of a speculative frenzy?

Huawei Mate 60 Series and the Stock Market

Facing international sanctions, Huawei's Mate 60 series has been heralded as China's technological resilience. Its sales figures are impressive, with over 600,000 units flying off the shelves in weeks. The previous Mate 50 series had sales of around 5 million units, and it's projected that the Mate 60 series could surpass 6 million units.

The Mate 60's success set off a domino effect in the stock market. Dongguan Chitwing Technology (002855.SHE) saw its stock price witness a jaw-dropping 335.35% increase in just a month. Companies like Routon Electronic Co. (600355.SH) and Dalian Zhiyun Automation Co. (300097.SHE) also saw their stock prices soar — the common thread being a tenuous association with Huawei.

The Reality of Business Ties

While these stock surges paint a rosy picture, the underlying business relationships between these companies and Huawei are questionable. Dongguan Chitwing's precision components supplied to Huawei through ODM manufacturers accounted for only 0.46% of their 2021 revenue, 3.48% in 2022, and 3.70% in the first half of 2023 — a minor impact on overall performance.

Routon Electronic Co., whose stock surged over 50%, later clarified it had no business dealings with Huawei. Dalian Zhiyun Automation Co. stated it does not supply consumer electronics brands; its main clients are display panel manufacturers. Dongguan Chitwing itself issued an announcement warning that its stock had potential for irrational speculation after prices rose over 20% in two consecutive trading days.

The Speculation Game

The Huawei Mate 60 series is undeniably a market success, a testament to innovation and resilience. However, the stock market frenzy surrounding it serves as a stark reminder for investors. The disproportionate rise of these stocks, given their limited ties to Huawei, strongly suggests that speculative forces are at play. It is crucial to distinguish between stocks with genuine potential and those merely caught up in a wave of speculation. Taking the time to understand the true value behind these surges and avoiding speculation is more important than ever in China's current market environment.