China-US Row Over Cyber Spying Boosts Mainland Tech Stocks

The row over cyber spying between the US and China has helped the latter's technology sector, which had been an unprofitable area for investors.

Chinese technology shares have become the stock market's biggest winners, with their benchmark index rallying 5.5% since 19 May, when the US indicted five military officials from China for spying on American companies, according to Bloomberg.

Denying the allegations, China accused the US government of being "deceitful" and employing double standards.

In retaliation, China ordered state-owned companies to cut ties with US consultants and warned it will scrutinise US technology companies operating in the country.

The country excluded Microsoft's Windows 8 operating system from a state purchasing order and pushed local banks to shun servers made by US-based IBM and replace them with a local brand.

As a result, there was speculation that the dispute would give a competitive edge to China's technology companies over their US rivals, and the CSI 300 Information Technology Index became the best performer among 10 industry groups in China.

Technology giant Lenovo Group gained 9.9% in a seven-day rally through 28 May, its longest duration of gains since 2003.

"The government is encouraging the usage of hardware and software products made by domestic producers, which provides a long-term boost to the industry," Bloomberg quoted as saying Wang Weijun, a strategist at Zheshang Securities Co in Shanghai.

"National information security is a big thematic play for investors."