Strong demand for Huawei's products is fuelling investor interest in shares of its suppliers, which have bucked the trend as China's A-share market has fallen.
Expectations that the Chinese technology company's recently launched products could continue to sell well are pushing the shares of some Huawei suppliers to record highs.
Some analysts said that Aito, an electric car brand backed by Huawei, successfully launched the new M7, and orders are expected to continue to increase, based on the response of the new M7 after its launch during the Golden Week holiday.
After China's A-share market reopened after being closed for the Golden Week holiday, Ask's partner, Seres Group (601127.SH), and Ningbo Shenglong Automotive Powertrain System, an auto parts maker. 603178.SH) shares listed on the Shanghai Stock Exchange have hit their daily limit of 10% so far this week. The benchmark Shanghai Composite index was down 0.7% in afternoon trading Tuesday.
Shengang Securities analyst Cao Xuti said in a note that Shengang's sales have surged on the back of the new M7, compared with less than 10,000 units sold a month as of August.
Cao Xute also said that fourth-quarter sales are expected to improve significantly from the previous quarter.
In addition, after the launch of the Mate 60 smartphone in late September, shares of Huawei's component suppliers have also moved higher.
OFILM Group Co., LTD (002456.SZ) surged 9.9% on the Shenzhen Stock exchange on Tuesday and has risen 21% this week. Shares of Vanchip (Tianjin) Technology, 688153.SH, rose 10% and are up about 8% this week. By contrast, the tech-heavy Shenzhen Composite Index fell 0.4 per cent on Tuesday.
"We sense a pick-up in investor interest in the smartphone supply chain following the launch of the iPhone and Mate 60 and the expected bottoming of smartphone demand," said Kyna Wong, an analyst at Citigroup, in a note following the bank's recent meeting with institutional investors on China's tech sector.
Wong said Huawei's return could have an impact on market share and competition in technology hardware.
Wong said component makers are expected to benefit from operating leverage from the resumption of specification upgrades and volume growth, regardless of changes in market share.