• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing

Double Whammy as Chinese Chip and Consumer Plays Descend

The U.S. Commerce Department's tough new rules on semiconductor supply promise to set back China's ambitions to develop its own chip industry.
By ALEX FREW MCMILLAN
Oct 10, 2022 | 09:23 AM EDT
Stocks quotes in this article: BYDIY, BYDDY, NVDA, AMD, GDS, WXXWY, AZN, JDHIY, HHGGY, SCHYY, LNNGY, CRHKY, HDALF, TCOM

Chinese tech stocks sold off on Monday in Hong Kong, feeling the impact of U.S. curbs on chip and high-end tech shipments into China.

The Hang Seng Tech Index shed 4.0% today, dragging the broader-market Hang Seng Index down 3.0% by the close. Hong Kong stocks are already at 11-year lows.

There were also large losses for Chinese consumer plays, with various Chinese cities shifting back into lockdown and movement restrictions again ahead of the start of a key political meeting this coming Sunday.

Consumer-electronics supplier BYD Electronic International (BYDIY)  (HK:0285) plunged 11.0%, the worst showing in the Hang Seng Tech Index. It is a spinoff out of the electric-car company BYD (BYDDY)  (HK:1211) that's backed by Warren Buffett, but makes tech components for smartphones, computers, smartcars and wired home appliances.

The U.S. Commerce Department on Friday issued a new set of rules restricting the export of advanced computer chips to China, and to companies with chip factories in China. The action aims to cut off the supply of semiconductors to China that could be used in military applications or for supercomputers, to preserve any U.S. competitive edge. It also restricts the supply of materials used to make semiconductors and integrated circuits.

That is knocking Chinese companies that rely on foreign-made chip technology. The new rules apply not only to U.S. companies, building on a set of restrictions already communicated to Nvidia (NVDA) and Advanced Micro Devices (AMD) , but also apply to any overseas company using U.S. technology.

Data-center developer GDS Holdings (GDS)  (HK:9698) suffered next-most, shedding 10.0%.

The new U.S. Commerce Department rules come from its Bureau of Industry and Security. The bureau also added 31 Chinese companies including leading Chinese chipmaker YMTC (full name Yangtze Memory Technologies Co.) to its list of "unverified" entities where it feels there is a "sustained lack of cooperation by a foreign government" preventing the U.S. government from verifying the "bona fides" of a company.

The action against unverified companies can escalate into their inclusion on the "entity list," a fate suffered by the Chinese mobile-phone and telecom-systems maker Huawei in 2019. U.S. companies can't supply such companies without express permits and permission.

However, companies can also get themselves removed from the "unverified" list if they do cooperate on providing information. The bureau also removed nine entities from the unverified list, including the drugmaker WuXi Biologics (WXXWY)  (HK:2269), which makes ingredients for the Covid-19 vaccine from AstraZeneca (AZN) . Nevertheless, WuXi shares fell 2.5% today in Hong Kong.

Feeling the tech fallout, the online pharmacy and health clinic JD Health International (JDHIY)  (HK:6618) lost 9.6%, with chip foundry operator Hua Hong Semiconductor (HHGGY)  (HK:1347) not far behind, falling 9.4%.

China's largest chipmaker, SMIC (HK:0981), saw its shares fall 4.0%. Tech analysts say the new U.S. restrictions will really bite, and set back China's ambitions to develop a self-sufficient chipmaking industry by 2030.

Nomura said it believes SMIC, unlisted YMTC and another unlisted DRAM supplier, CXMT, cannot upgrade their tech nodes and cannot expand their current capacity. "Thus, we believe it will thwart China's ambition to grow its semiconductor industry for quite a while," Asia tech analysts C.W. Chung and Jung Cho explain.

The prospects weren't pretty on the consumer front, either, thanks to a rise in Covid-19 cases during the Golden Week. The highly transmissible B-7 Omicron variant was detected in the Chinese province of Inner Mongolia for the first time, and there's the prospect that travelers could further spread Covid nationwide.

Domestic tourism revenue fell 26.2% year-on-year over the holiday, government figures show, steepening the 22.8% decline seen during the Mid-Autumn Festival long weekend in September. While some cities have been relaxing restrictions, the general direction is toward tougher movement controls.

The capital of the "Chinese Hawaii," Hainan Island, entered a full lockdown on October 6, with the city of Haikou requiring people to stay in place and be tested for Covid. Hohhot, the capital city of Inner Mongolia, stopped allowing outside cars in, while the entire Xinjiang province has banned people from leaving.

Macau casino operator Sands China (SCHYY)  (HK:1928) was the worst performer in the broad Hang Seng, down 9.1%, with scant prospect of Chinese gamblers making quick trips to the tables.

The Covid restrictions will only ramp up ahead of the 20th National Congress of the Chinese Communist Party, which starts this coming Sunday in Beijing. It's a key once-in-five-years meeting that will settle the party's leadership for the next half decade -- including the reelection of Chinese President Xi Jinping.

Other major decliners include athleisure brand Li Ning (LNNGY)  (HK:2331), down 8.8%, brewery China Resources Beer (CRHKY)  (HK:0291), down 7.6%, and the hotpot restaurant chain Haidilao (HDALF)  (HK:6862). The online travel agency Trip.com (TCOM)  (HK:9961) shed 6.9%.

Mainland markets had a sobering return to action after the week-long holiday following China's National Day on October 1. The CSI 300 index of the largest listings in Shanghai and Shenzhen fell 2.2%, although U.S. tech stocks have rallied and returned to much the same point as the last mainland trading before the break on Friday, September 30.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
TAGS: Investing | Markets | Stocks | Trading | World | Consumer Services | Semiconductors & Semiconductor Equipment | Asia | China | Consumer Products | Global Equity | Warren Buffett | Coronavirus

More from Investing

Let's 'Triangulate' Costco's Breakout Potential

Bruce Kamich
Mar 27, 2023 12:14 PM EDT

Shares of them membership have outlined a really large triangle formation. Here's which way the stock is leaning.

Why Market Indexes Are Often a Poor Measure of What's Really Going On

James "Rev Shark" DePorre
Mar 27, 2023 11:55 AM EDT

We are witnessing one of the most extreme disconnects in decades between the Nasdaq 100 and Russell 2000.

What the Fed Has Wrought

Bret Jensen
Mar 27, 2023 11:00 AM EDT

Damage From the central bank's policy mistakes are likely to keep growing.

Movado Shows Now Isn't the Time to Issue Disappointing Guidance

Jonathan Heller
Mar 27, 2023 10:35 AM EDT

The watchmaker saw its shares hammered on its outlook, which is a cautionary tale for other stocks.

Workday's Stock Looks Ready to Make Further Gains

Bruce Kamich
Mar 27, 2023 10:34 AM EDT

Let's check the charts and indicators.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 01:56 PM EDT PETER TCHIR

    Very Cautious

    I am very cautious here. I don't like how the c...
  • 08:58 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    How to Adjust Your Trading Style as Market Conditi...
  • 05:00 PM EDT CHRIS VERSACE

    AAP Podcast on the Fed Decision!

    Listen here!
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login