Companies with the biggest business exposure to China appear to have weathered the US-China trade war far better than those that have avoided the Chinese market, as the spat between the world’s two largest economies marks its second anniversary. US chip makers, in particular, seemed to have thrived, leading the gains on an equity index tracking the biggest global companies that derive a big chunk of their revenue from China since the trade war first flared up in the opening week of July 2018. Shares of Qualcomm, which supplies chips to Chinese smartphone makers, have surged almost 60 per cent in this time span, while those of Broadcom have advanced 26 per cent. Both of these companies as well as Texas Instruments are among the top four weightings on the MSCI World with China Exposure Index. Broadcom makes radio frequency chips for Apple products and Wi-fi components, and Texas Instruments makes chips for industrial and automotive products. The index, comprising 50 constituent stocks with a combined market capitalisation of US$1 trillion on June 30 , has risen almost 14 per cent over the past two year, beating the 6.3 per cent gain on the MSCI World Index that tracks both developed and emerging markets. This surprising outperformance underscores how deeply China and the United States are integrated in each other’s supply chains. Qualcomm, Broadcom and Texas Instruments count on China for at least 36 per cent of their revenues, according to Bloomberg data. On the other hand, China relies on imported American technology from these companies, as well as others, to keep afloat its high-end manufacturing sector, which makes products ranging from smartphones to telecoms equipment that are sold all over the world. “China cannot design and produce its home-grown chips in a short period of time, so it has to buy them from the US,” said Chen Hao, strategist at KGI Securities in Shanghai. “That is why the valuations of these US chip makers are so high, and these have priced in an assumption that China will not be able to replace these American imports any time soon.” Qualcomm now trades at 25.3 times its estimated earnings for this year, the highest for the multiple for at least a decade, Bloomberg data showed. It is the biggest constituent of the MSCI China exposure index with an 11 per cent weighting, and 48 per cent of its sales were derived from China last year. Broadcom and Texas Instruments are the second and fourth-largest members on the index, with a representation of 10 per cent and 8.5 per cent, respectively. The non-US companies among the top 10 constituents include BHP Group, Rio Tinto, Murata Manufacturing and Fortescue Metals Group. More upside has been forecast for US companies with exposure to China businesses, after the Trump administration reassured markets that the phase one deal with China will remain intact, and with the unprecedented liquidity unleased by the Federal Reserve expected to hold up elevated valuations. Analysts have set a 12-month price target of US$93.85 for Qualcomm, implying a 1.8 per cent gain from its latest close, while the share estimate of Broadcom suggests that the stock will rise 11.4 per cent to US$348.90 in the following year, according to Bloomberg data. And as the war of words over the coronavirus pandemic escalates between China and the US, analysts said they expected Beijing will procure more hi-tech products from the US to fend off a further deterioration of ties. “China is actually buying more semiconductor products from the US to stockpile before any ban,” said Hong Hao, managing director at Bocom International Holdings in Hong Kong. “And these chips cannot be obtained from somewhere else.” With additional reporting by Yujing Liu