Now, 5G buzz powers some telecom A shares

Shares of listed Chinese telecom companies with 5G capabilities are buoyant on the A-share market, following worldwide buzz about the commercialization of the fifth-generation technology and China's leading position in the area.

At the Mobile World Congress Barcelona, the pre-eminent and newly rebranded event of the global smartphone industry, which was held in Spain from Feb 25 to Feb 28, 5G was the hottest buzzword. And China's controversial Huawei was acknowledged as a clear winner insofar as new 5G handset models are concerned.

South Korea's Samsung and LG also disclosed details of the progress they had made in the production of 5G mobile phones. The 5G chips produced by telecommunications giants such as Qualcomm and Intel also made their debut at the MWC Barcelona.

All this 5G action translated into bullish sentiment in China toward the shares of certain listed domestic companies.

In the A-share market, the 5G sector surged 3 percent from Feb 25 to March 1, according to financial market data provider HiThink RoyalFlush Information Network.

At least eight A-share telecom companies attracted 5G-related inquiries from institutional investors during the week.

HiThink data further showed the A-share market's 5G sector surged 4.5 percent over five trading days beginning Mar 4. Wuhan Raycus Fiber Laser Technologies, which makes fiber optical equipment, and is listed on the Shenzhen Stock Exchange, reported the most significant 17-percent spike to 171.73 yuan during the period.

Miao Wei, minister of industry and information technology, said at the beginning of this year that China will grant temporary 5G licenses in a number of cities this year, to enable large-scale construction of 5G networks in key regions.

The ministry will also speed up efforts to hasten the development of 5G hardware, including smartphones, he said.

Yan Guicheng, chief communications industry analyst at China Securities, said the industry appears to promise a bright future for the shareholders concerned as China officially enters the 5G construction cycle this year.

The building of 5G infrastructure will see increased fixed asset investment, which will be relatively small for the time being. But an uptrend is foreseeable and investors should seize the right opportunity, he said.

"Companies that have high market value can be the right targets for investors. Meanwhile, companies that are very likely to outrun their competitors throughout the technology revolution are worth a close look, as the application of 5G technology will fundamentally change the world and points to the future.

"In this sense, investors can look at companies specializing in cloud services, augmented reality, virtual reality, high-resolution streamlining services, and internet of things," Yan said.

Nascent handsets

As estimated by Shenwan Hongyuan Securities, China's three major telecommunications operators will set up about 100,000 5G base stations this year at an estimated total investment of up to 40 billion yuan ($6 billion).

Last year was defined as the beginning of the 5G era and China has been taking the lead worldwide in the application of 5G technology in certain areas, said Wang Xi, senior analyst at market consultancy IDC.

But 5G mobile phones are still in the pre-commercial service stage and there is still a long way to go before their widespread rollout, he said.

Rather than focusing on the shipment of 5G devices, it is now more important to predict the future scenario and build the necessary ecosystem in which the new technology can be applied, Wang said.