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Deal
As American investors abandon shares of Chinese companies blacklisted by outgoing President Donald Trump, bargain hunters in China are taking the opposite side of that trade, betting that a Joe Biden presidency will reverse the ban on investments.
FILE PHOTO: A Semiconductor Manufacturing International Corporation (SMIC) logo is seen at the China International Semiconductor Expo (IC China 2020) in Shanghai, China on October 14, 2020. REUTERS / Aly Song
SHANGHAI: As American investors shed shares in Chinese companies blacklisted by outgoing President Donald Trump, bargain hunters in China are taking the opposite side of that trade, betting that a Joe Biden presidency will reverse. the investment ban.
Trump signed an executive order on November 12 that bans investment in US securities in Chinese companies that are allegedly owned or controlled by the Chinese military.
The outgoing US president is considering expanding that blacklist of 35 companies to include Alibaba and Tencent.
As US investors rush to sell shares of sanctioned companies and their subsidiaries before the executive order takes effect on January 11, Chinese investors are arriving.
Since the order was announced, mainland China’s holdings in the Hong Kong-listed shares of China Railway Construction Corp (CRCC) and CNOOC Ltd through China-Hong Kong Connect have roughly tripled, according to stock trader Hong Kong. Exchanges and Clearing Ltd.
Other blacklisted stocks, including rail equipment maker CRRC Corp, China Communications Construction Co and semiconductor giant SMIC also witnessed heavy inflows of money.
Zhu Haifeng, a veteran Chinese retail investor, said he was looking for bargains at CNOOC and CRRC, which had lost as much as 27% since Trump’s order.
“They are globally competitive companies and they are China’s ‘calling cards’,” said Zhu, who sees limited impact on corporate fundamentals from the US sanctions.
Wan Chengshui, a portfolio manager at Hangzhou-based Golden Eagle Fund Management Co, said he plans to increase his holdings in Tencent if prices fall further.
“Trump politicized everything in the name of national security. When Biden takes office, I think things will improve,” Wan said, predicting that Trump’s executive order will be overturned and that sanctions against Tencent and Alibaba will not materialize.
Wan is not alone.
When Tencent plunged nearly 5% in Hong Kong following news of the possible blacklisting on Thursday, Chinese investors invested a net HKUS $ 4.6 billion (US $ 593.29 million) in its shares through a channel. of cross-border trading, making it the most actively traded stock. under the scheme of that day.
Global index publishers MSCI, FTSE Russell, and S&P Dow Jones Index have been quick to remove the blacklisted stocks from their global benchmarks, forcing passive investors to ditch those holdings.
Phillip Wool, head of investment solutions at Rayliant Global Advisors, said investors could find bargains as active investors turn stocks into early passive exits.
“Non-US investors will see the prices of those stocks fall and at some point they will decide that it is a buying opportunity,” said Wool.
Meanwhile, uncertainty persists around the scope and implications of Trump’s executive order, while the gradual expansion of the list is another guessing game, Wool said.
Therefore, “there is also a potential opportunity for active investors in terms of guessing to the rest of the market about how the political situation will develop.”
After making two U-turns twice this month on the subject, the New York Stock Exchange said Wednesday it will delist three Chinese telecommunications companies.
Since the first NYSE delisting announcement on January 1, Chinese investors have been inflexible buyers. Mainland China holdings under Connect in China Mobile Ltd, China Telecom Corp Ltd and China Unicom Hong Kong Ltd, have risen 37%, 28% and 41%, respectively.
(US $ 1 = 7.7534 Hong Kong dollars)
(Reporting by Samuel Shen and Andrew Galbraith; Edited by Vidya Ranganathan and Kim Coghill)
