“Given the acceleration of the mending of the China-US relations, there’s a large chance that an optimistic-case scenario for the relationship will occur after the meeting between the two leaders,” said Yang Zhengwang, an analyst at Northeast Securities. “The China-US relations will usher in a window for an easing period and we may see a narrow-down of the tariff list.”
US tariffs on imported Chinese goods average 19.3 per cent, with the punitive ones as high as 66.4 per cent, compared with the average of 3 per cent on other nations, according to Guotai Junan Securities.
Domestic appliance maker Zhejiang Cayi Vacuum Container, Amlogic, which makes chips for set-top boxes and smart televisions, and lighting fixture manufacturer Guangzhou Haoyang Electronic are among the top picks recommended by Northeast Securities ahead of the Xi-Biden meeting. The three companies rely on the US for at least 90 per cent of their sales, the brokerage said.
Shares of Zhejiang Cayi have advanced 51 per cent this year in Shenzhen and those of Guangzhou Haoyang have risen almost 3 per cent, while Amlogic has eased 4.7 per cent in Shanghai. All have outpaced the 7.5 per cent decline in the CSI 300 Index.
Bridgewater sold Xpeng, Yum, TSMC last quarter as hedge funds cut China bets
Bridgewater sold Xpeng, Yum, TSMC last quarter as hedge funds cut China bets
Those sectors standing to benefit from the waning of the geopolitical risk include machinery, textiles and apparel, electronics, power equipment, lighting, carmakers and home appliance manufacturers, said Yang.
“With the China-US leader meeting as the catalyst, sentiment will probably be lifted to drive up stocks,” said Zhang Yusheng, an analyst at Everbright Securities in Shanghai. “Investors should watch those stocks that tend to outperform historically after high-level US-China meetings,” he added, referring to shares of companies that manufacture textiles, apparels, electronics and automobiles.
While China would like to see a reduction in the Trump-era tariffs and an end to the technology curbs, the US would want to see Beijing cut down on fentanyl coming into the US, improve military communications, and show more restraint in the South China and East China seas.
But despite the optimism ahead of the Xi-Biden summit, experts are cautioning against getting expectations too high.
“Although China and the US still share many common interests, especially when it comes to global issues, there is little chance of substantial progress and most of them may be principled consensus at best,” he said.