Shares in China's Semiconductor Manufacturing International Corp jumped as much as 16 percent on Tuesday on a news report that the Datang Telecom group may buy a 20 percent stake in SMIC, the nation's biggest contract chip maker.

An SMIC spokeswoman declined to comment on the report, while Datang Telecom could not immediately be reached for comment.

The stock rose as high as HK$0.475 before easing slightly to stand at HK$0.465, up 13.4 percent, at 0426 GMT, outperforming a flat overall market.

The China Business News, a leading mainland financial daily, quoted an SMIC source in a report on Tuesday as saying that Datang Telecom Technology and Industry Group, an affiliate of the parent of Shanghai-listed Datang Telecom (600198.SS: Quote, Profile, Research, Stock Buzz), intended to form a cooperative relationship with SMIC and to invest more than 2 billion yuan ($293 million) in the chip maker.

The report also quoted a source as saying Datang may buy 20 percent of SMIC but it remained unclear how much it might pay for the stake.

The company said in late March it was in advanced talks with strategic investors, sparking a rise in its shares from an all-time low.

The shares surged a further 42 percent on April 15 as talk heated up that the struggling firm was close to selling a stake to a major investor to sustain it during an expected downturn in the chip sector.

The shares subsequently gave back those gains and dipped to a fresh all-time low of HK$0.395 early this month. 

Despite Tuesday's news report and the shares' rebound, some analysts remained cautious.

"Even if the report is true, the fact remains that the company is still faced with a number of challenges and will continue to make losses unless there is some significant asset injection," said Castor Pang, strategist with Sun Hung Kai Financial. ($1=6.819 Yuan)

Source:reuters