Markets, both in the US and China, warmly welcomed the temporary hold on new tariffs after President Donald Trump and Chinese counterpart Xi Jinping found a common ground at the G20 Summit held in Buenos Aires last weekend.
Numerous stocks have been at the receiving end of the escalating trade tension between both the countries. The temporary truce comes as a breather for these stocks, with many of them closing much higher on Monday. But a permanent resolution would give rise to numerous winners. Let’s see who they are.
…..But if a fair deal is able to be made with China, one that does all of the many things we know must be finally done, I will happily sign. Let the negotiations begin. MAKE AMERICA GREAT AGAIN!
— Donald J. Trump (@realDonaldTrump) December 4, 2018
The elite club has taken a beating recently, though most of the blame should land on Apple (AAPL). On Monday, all these stocks jumped on reports of the ceasefire. Apple closed up 3.4%; Amazon (AMZN) up 4.8%; Netflix (NFLX) up 1.4%; Alphabet (GOOGL) up 0.6%; and Facebook (FB) up 0.3%.
Given that these companies have a wide geographic presence, removal of trade barriers would greatly benefit these companies.
Semiconductors, automobile makers
Thanks to the increasing demand for mobile phones and electronic devices, the semiconductor industry is today a highly competitive sector. Chips are often shipped between nations by device manufacturers to ensure superior quality and cheaper rates, making the industry highly prone to the tariff trap.
Major chipmakers including Qualcomm (QCOM), Nvidia (NVDA), Micron (MU), Broadcom (AVGO) and Intel (INC) have high Chinese exposure. The sector would be one of the largest beneficiaries of the trade war resolution.
The same applies to automakers. If you remember, Harley-Davidson (HOG) had locked horns with President Trump after the motorcycle maker said it would shift some of the production outside the country to avoid tariffs. This is apart from car companies that sell in China.
US-listed Chinese stocks
Despite the strong operational performance, Chinese companies listed in US stock markets have been on a downward trajectory over the last year due to trade war concerns. In the past 52 weeks, Alibaba (BABA) is down 12%; Baidu (BIDU) is down 23%; Weibo (WB) is down 45%, and JD.com (JD) is down 43%.
If the cloud clears over the trade war, investors would start once again meriting these stocks on their performance.
Chinese multinational telecommunications firm ZTE Corp would be one of the largest individual beneficiaries of a trade war resolution. The company has been caught between a rock and a hard place after US banned American suppliers from selling to ZTE for allegedly violating trade sections.
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