Investors are running scared after Chinaโs semiconductor-focused investment fund announced Friday plans to cut its stake in three chipmakers. Shares of three chipmakers fell by up to almost 8% when the market opened on Monday.
Why it matters: The move came after the National Integrated Circuitry Investment Fund, dubbed the โBig Fund,โ closed a new mass-fundraising in October amid Chinaโs pushes to mobilize public and private funds into the sector.
- The fund is backed by Chinaโs Ministry of Finance and state-owned enterprises such as China National Tobacco and the countryโs three major telecom operators.
- Experts believe that state-backed funds targeting specific sectors act as a vote of confidence from the government, and help lure private capital to invest in those sectors.
Details: Shares of Beijing-based flash memory designer Gigadevice Semiconductor, fingerprint identification chips maker Shenzhen Goodix, and Hunan Goke Microelectronics tumbled during the weekend. On Friday night the Big Fund announced it would reduce stakes in them by around 1% each during the next three months.
- The fund currently holds 9.7%, 6.6%, and 15.6 % in the three companies respectively.
- Share prices of the three companies had dropped by 5.9%, 7.8%, and 7.9% respectively as stock markets opened on Monday morning.
- The state fund said the purpose of the offloading was to โrealize better returnsโ for shareholders, according to one of the filings.
- Analysts at China Merchants Securities, a broker, said (in Chinese) the move was a โroutine operationโ and wonโt change the Chinese governmentโs strategy to support the technology sector.
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Context: The โBig Fundโ raised RMB 204 billion (around $29.1 billion) in October in its second financing round.
- The fund was set up in 2014, rasing RMB 138.7 billion from the finance ministry, China Development Bank Capital, as well as several other state-backed enterprises.
- The first fund has so far invested in 23 semiconductor firms ranging from chipmakers to chip designers and semiconductor material makers, according to data from securities firm Changfeng Securities (in Chinese).
- Last month, China set up another state-backed fund focusing on the manufacturing industry, which raised $21 billion.
