It might be worth biding your time with the China trade.
While some on Wall Street are cheering the advent of a Joe Biden presidency as a plus for U.S.-China relations and therefore Chinese stocks, others aren’t sure it’s time to dive in.
Hong Kong-listed shares of tech giants including Alibaba, JD.com, Tencent and Meituan fell sharply on Wednesday after Chinese regulatory officials proposed new guidelines meant to crack down on internet platforms’ monopolistic tendencies.
“Right now, there’s actually still a lot of unspent and pent-up stimulus that hasn’t unleashed into the Chinese economy that should continue to help that recovery,” Chantico Global CEO Gina Sanchez told CNBC’s “Trading Nation” on Wednesday.
More than 20 U.S. companies told shareholders that a rebound in Chinese sales helped their quarterly results this earnings season, a CNBC analysis found.
“At the same time, they’re grappling with these issues regarding technology platforms,” Sanchez said, adding that a Biden administration may not guarantee an end to China’s regulatory challenges.
“The biggest change that we can expect is that that tone will become more civil, but I actually am not expecting Biden to let up on some of these issues — IT theft, issues around human rights, civil liberties, etc.,” she said.
“I don’t see the U.S. rolling over on those issues and, if anything, Biden could even be tougher by virtue of being seen as more credible,” she said. “That could also sort of spell some trouble for U.S.-China relations and the trade that results from that.”
In the same interview, Miller Tabak chief market strategist Matt Maley focused on Alibaba following a record-breaking Singles Day, the global shopping holiday that falls on Nov. 11.
“China wants to be an economic world power. Well, they already are an economic world power, but an even bigger, No. 1 economic world power,” Maley said. “Alibaba’s going to be one of those companies that helps them do that. So, I think the stock has been beaten up a little bit too much.”
On a technical basis, Maley was watching the $250-255 level in Alibaba. The company’s U.S.-listed shares closed down less than half of 1% at $265.65 on Wednesday.
“The stock has already broken below its trend line going back to March and if it makes a lower low below that 255-ish level, that’s going to be very concerning,” Maley said. “It looks like it’s going to hold that level, but keep a close eye on that.”
Longer term, Maley suggested keeping an eye on tensions between China and Taiwan.
“Our foes from time to time try to test the resolve of a new president. If they think that they can do what they did in Hong Kong and they can do it in Taiwan, I think there’s going to be a lot more pushback and that’s going to have a big impact on global trade,” he said. “That can be a big problem, but between now and the end of the year, I think things look OK. But keep an eye on that next year.”
Source: CNBC
