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Nomura names four stocks set to benefit from China’s 5G push

People try out ZTE mobile phones on day two of the Mobile World Congress (MWC) Shanghai 2019 at the Shanghai New International Expo Center on June 27, 2019 in Shanghai, China.

VCG | Visual China Group | Getty Images

China issued 5G licenses in June, paving the way for the next-generation cell network to be fully rolled out commercially. According to Nomura, that rollout signals a coming demand boost for Chinese companies in the network infrastructure and equipment space.

In a Thursday report, the Japanese bank picked out a few stocks with a “buy” rating for investors: equipment company ZTE, cell tower operator China Tower, Chinese telecommunications firm China Communications Services, as well as equipment company Yangtze Optical Fibre and Cable with a “neutral” rating.

They are all listed in Hong Kong.

The four 5G licenses went to state-owned carriers China Mobile, China Unicom and China Telecom, as well as broadcaster China Broadcasting Network Corporation. Telecommunications equipment giant Huawei, a leading player in 5G, meanwhile, has said it is prepared to support China’s initiative.

China’s tech rivalry with the U.S. is likely to push the country’s domestic industry to develop its own research and products, the bank projected, saying that’s good news for its highlighted companies in the long run.

“Although China still lags the leading camps in key component sectors (e.g. communications chips, power amplifiers, and high-end optical chips), we believe China’s 5G network enablers will gradually diversify their supply chain from relying on a small group. This should help accelerate (research and development) and product launch from domestic technology leaders, and improve their competitiveness in the long run,” Nomura said in the report.

The U.S. has in recent years sought to penalize ZTE and restrict the use of Huawei’s technology. Nomura said those actions have served as “wake-up calls” for China’s tech industry.

Some analysts had predicted that the U.S. ban on Huawei buying parts and components from American firms without Washington’s approval could be a stumbling block in China’s 5G rollout. Other Chinese companies, too, have been reliant on using American technology in their products.

— Reuters contributed to this report.

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