Goldman’s tips on navigating China’s turbulent stock markets in a US presidential election year
- The Wall Street bank favours Meituan, China Merchants Bank, Haidilao and Kuaishou, but feels Hua Hong Semiconductor, Wuxi AppTec and Li Auto could underperform
- A US bill targeting TikTok and Donald Trump’s threat to impose an across-the-board 60 per cent tariff on Chinese exports have led a rise in US-China tensions
Chinese domestic consumption stocks are a safer bet than hardware and semiconductor makers should tensions escalate between Beijing and Washington in the run up to the US presidential election, according to Goldman Sachs.
China’s biggest on-demand delivery firm Meituan, China Merchants Bank, hotpot restaurant chain operator Haidilao International Holdings and short-video platform Kuaishou Technology are among the onshore stocks on the MSCI China Index that are inclined to outperform in the event of any geopolitical flare-up, analysts led by Kinger Lau and Timothy Moe said in a report on Thursday.
Other yuan-traded stocks favoured by the US investment bank include liquor distiller Luzhou Laojiao, Yanghe Brewery, Postal Savings Bank of China and Dong E-E-Jiao, which makes traditional Chinese medicines and healthcare products from donkey hide.
However, the likes of Hua Hong Semiconductor, drug maker Wuxi AppTec and electric-vehicle maker Li Auto may underperform when ties between the world’s two largest economies worsen, the report said.
Hua Hong is among the Chinese chip makers that have been targeted by sweeping sanctions by the US, while a bill is in the works to block Chinese biotechnology companies, including Wuxi AppTec, from doing business with the US government because of their alleged complicity with the Chinese military.
“The relative performance between the two portfolios has correlated well, at least directionally, suggesting that they could be regarded as efficient vehicles for investors to express their views on US-China relations in the equity universe,” the report said. That mirrors “a defensive tilt and domestic-demand orientation when external uncertainty rises or investor risk appetite falters”.