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.
Analysts have expressed optimism about Huawei’s return to the high-end smartphone market in mainland China. 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. But beyond the product itself, the stock market’s reaction has been the real spectacle.
The Mate 60’s success has set off a domino effect in the stock market, especially among the so-called “Huawei concept stocks.” Dongguan Chitwing Technology (002855.SHE) is a prime example, with its stock price witnessing a jaw-dropping 335.35% increase in just a month since last August. Companies like Routon Electronic Co.（600355.sh）and Dalian Zhiyun Automation Co. (300097. SHE) have all seen their stock prices soar. The common thread? An association, however tenuous, 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 questioned.
Dongguan Chitwing Technology, the leading Huawei-concept stock rise, made an announcement on 26 September 2023, stating that its stock has potential irrational speculation after the price had risen over 20% in two consecutive trading days and over 100% in ten trading days.
Dongguan Chitwing Technology primarily produces molds and parts, mainly used as hardware for smartphones, smartwatches, VR/AR, tablets/PCs, smart speakers, and smart home devices. The announcement also disclosed their revenue proportion from Huawei: the company’s precision components supplied to Huawei through ODM manufacturers accounted for 0.46% of their 2021 revenue, 3.48% in 2022, and 3.70% in the first half of 2023. This revenue has a minor impact on their overall performance. And it’s worth noting that these figures only represent indirect supplies to Huawei, and whether the company directly supplies Huawei was not revealed.
Routon Electronic Co., a company specializing in smart control products and commercial terminals, saw its stock price surge, hitting the daily limit for four consecutive days and rising over 50% since 20 September 2023. However, the company later clarified on 22 September that it had no business dealings with Huawei. They also highlighted their financial losses in 2022 and the first half of 2023, urging investors to be cautious.
In response to inquiries about their products being used in Huawei’s Mate60 Pro, Dalian Zhiyun Automation Co. stated they don’t supply consumer electronics brands. Their main clients are display panel or module manufacturers.
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 in play. The Mate 60 series’ success may be attributed to a speculative bubble, with investors perhaps more enamored by Huawei’s name than genuine business fundamentals.
It is crucial to distinguish between stocks with genuine potential and those merely caught up in a wave of speculation. The recent surge in the value of Huawei concept stock is a clear example of why doing market research and analysis rationally is so important. It’s essential to take the time to understand the true value behind these surges and avoid getting caught up in speculation.