SMIC shares surge over 200% in Shanghai debut

Shares of Chinese heavyweight chipmaker SMIC jumped more than 200% during its Thursday debut on the Shanghai tech bourse while those listed on the Hong Kong exchange fell 17%, signaling skepticism from global investors.

Why it matters: The contrast shows that international investors are cool on the prospects of China’s biggest contract semiconductor manufacturer despite strong support from the state.

• Shanghai-based Semiconductor Manufacturing International Corp. (SMIC) is expected to play an important role in China’s ambitious plan of making 70% of chips it uses by 2025 under the Made in China 2025 initiative, a government scheme announced in 2015 with the aim to boost the high-tech sector.
• However, experts have said SMIC is “generations behind” the world’s edge-cutting chip-making technology. The company mainly produces 14-nanometer wafers while companies such as Taiwan Semiconductor Manufacturing Co. have started mass-producing 5-nanometer ones.

Details: Shares of SMIC surged 245% to RMB 95 at the open on its first day of trading on Shanghai’s Nasdaq-style STAR Market. The shares were priced at RMB 87.1 (around $12.5) by the end of the morning trading session.

• The company issued 1.7 billion shares at RMB 27.5 each on its secondary listing in Shanghai.
• Meanwhile, shares of the company listed in Hong Kong were down 17% to HKD 31.9 (around $4.11) during Thursday morning’s trading session.
• “Some investors have switched their money from the HKSE-listed entity to the STAR-listed entity, on the expectation the IPO would ‘pop,’” said Michael Norris, research and strategy lead at AgencyChina.

Context: SMIC’s secondary listing on the Shanghai bourse is the biggest stock sale in mainland stock markets in a decade since Agricultural Bank of China’s RMB 68.5 billion initial public offering in 2010.

• SMIC’s shares were up more than 200% in Hong Kong this year.
• In May, China’s National Integrated Circuit Industry Investment Fund, a state-backed industry fund, injected more than $2 billion into a SMIC chip fabrication plant.