July 16, 2020 / 2:06 AM / 22 days ago

SMIC shares surge in Shanghai debut after $6.6 billion offering

SHANGHAI (Reuters) - Shares in semiconductor Manufacturing International Corp (SMIC), China’s biggest chipmaker, more than tripled when they debuted on the Shanghai market on Thursday in one of the most anticipated listings of the year.

SMIC’s arrival on Shanghai’s Nasdaq-style STAR Market was closely watched given both its size and importance to China’s drive for greater technological independence amid rising U.S. restrictions on the country’s data firms.

SMIC 688981.SS opened at 95 yuan, 246% higher than its offer price of 27.46 yuan. The company has said it plans to use the $6.6 billion raised in its share sale ahead of Thursday’s listing to build plants and replenish operating capital.

Specifically, it intends to build out foundries for the manufacture of computer chips that can compete with those operated by Taiwan Semiconductor Manufacturing Co Ltd (TSMC) (2330.TW), the industry’s market leader.

However, SMIC’s global aspirations fall under the shadow of tense Sino-U.S. relations, after U.S. restrictions announced in May against China’s Huawei Technologies Co Ltd [HWT.UL] on security grounds.

The U.S. decision to prevent Huawei from receiving supplies or services from American companies also threatens Huawei’s suppliers such as TSMC and SMIC. However, analysts said SMIC remains China’s best hope for developing a first-class chip fab, in spite of significant business hurdles given its size and progression.

Li Xinxie, a tech analyst with Shanxi Securities, said the enthusiasm for SMIC’s Shanghai stock reflected ongoing confidence for China’s tech self-sufficiency push.

SMIC’s opening price represents a more than 300 PE ratio, and a premium of more than 200% over its Hong Kong-listed shares (0981.HK), which fell as much as 28.5% in volatile trade on Thursday on profit-taking.

On the mainland, the CSI all share semiconductors and semiconductor equipment index .CSIH30184 tumbled nearly 8% as investors pocketed gains after a rally in recent weeks.

Reporting by Samuel Shen and Josh Horwitz; additional reporting by Luoyan Liu; Editing by Jane Wardell

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