Hong Kong chip stocks rally, Montage Technology up over 17%

The Hong Kong chip sector continued its strong performance on Monday, with the market betting that the Xi-Trump summit could lead to a relaxation of semiconductor export controls, resulting in a significant increase in the net inflow of funds to related targets.

The Hang Seng Tech Index has recently been consistently outperforming the broader market, with AI chips and advanced manufacturing segments becoming the main directions for funds to accumulate. On May 11th, at the opening, Montage Technology surged by over 17%, and Hua Hong Semiconductor jumped by 7.7%, with Semiconductor Manufacturing International Corporation and Bilinx Technology also strengthening their positions.

The core driving logic for this market trend is that the market has started to price in the possibility of "rare earths in exchange for WFE relaxation" during the summit negotiations.

A Jefferies research report points out that the most likely direction for the U.S. to make concessions is to relax the export controls on etching, deposition, and ion implantation equipment required for 14nm/7nm processes. Once the U.S. eases restrictions, the Netherlands and Japan are expected to follow suit, allowing the sale of high-end DUV lithography machines to China.

However, analysts highlight two risks: firstly, the lack of internationally recognized wafer fabs in the Hong Kong stock market limits the impact of funds on the broader market performance, with an increasing flow towards the more aggressively anticipated growth in the Japanese and Korean markets. Secondly, Jefferies clearly states that even if export controls are relaxed, China will not give up on its goal of localization. In the short term, relaxed controls are more likely to help overcome 7nm yield bottlenecks, creating incremental demand for domestic equipment manufacturers rather than changing the competitive landscape.

Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor remain the preferred targets for institutional benefits from the summit. Jefferies maintains a buy rating for Sino Micron Technology, with a target price of CNY 415; Hua Hong Semiconductor maintains a hold, with a target price of HKD 91.