THE Trump administration’s blacklisting of technology giant Huawei Technologies Co. has taken a toll on U.S. semiconductor shares, but China-listed firms have rallied as investors bet they can gain from the country’s stepped-up efforts to build a homegrown supply chain.

Share price gains of little-known firms such as Shenzhen Fastprint Circuit Tech and Jiangsu Changjiang Electronics Technology could be fleeting, analysts say, but Huawei’s troubles could accelerate a long-term campaign in China to replace imported technologies.

Since the White House added Huawei to a trade blacklist last week, several global companies have suspended business with the world’s largest telecom equipment maker.

Citic Securities called the U.S. ban on Huawei “a warning bell” for China’s chip industry, highlighting the importance of establishing independent supplies in the chip industry chain.

Rapidly escalating Sino-U.S. trade tensions have also raised the stakes for Shanghai’s Nasdaq-style technology board, which will be launched as soon as next month. The board is largely seen as part of China’s efforts to counter U.S. curbs on Chinese technology advancements.

U.S. President Donald Trump put Huawei on the U.S. “Entity List” last Wednesday, effectively banning U.S. companies from doing business with the Chinese firm, triggering sharp falls in U.S. suppliers including Qualcomm Inc. and Broadcom Inc.

But China’s semiconductor sector has gained nearly 5 percent this week, bolstered by a burst of buying. The sector has far outperformed the broad index.

Despite the rally, analysts say China still lags behind in the core technologies required for a self-reliant domestic semiconductor industry, and the market reaction reflects short-term investor optimism toward a complicated, long-term problem.

“Logically, it makes sense to bet on domestic substitution, but we don’t see any change in fundamentals yet,” said Reagan Li, fund manager at Shanghai V-Invest Co.

The U.S. ban on Huawei has roiled the global supply chain, “potentially creating opportunities for China to re-establish industry order, but what matters is whether the companies have the ability to capitalize on it,” Li said.

But such investor optimism is badly needed for China’s semiconductor industry, under threat from the U.S.-China trade spat and which needs support from capital markets for funding.

(SD-Agencies)