China is one of the regions that experts favor the most to invest in the coming years. In the outlook reports for 2021 it is one of the stories that is repeated the most: China, the Asian giant that has been able to deal with relative success in the coronavirus pandemic, and which is called to be the world’s leading economy, to have a certain weight in your wallet.
However, in recent weeks certain problems have arisen for the price of some of the most notable firms on the market: Donald Trump’s veto of investment in certain Chinese companies by US citizens has brought uncertainty, in addition to falls in the quotes of the firms affected by the order.
What appears to be Trump’s latest attack on the Asian market has had consequences. One of them has been the decision of the New York Stock Exchange to erase the companies that are listed on its stock exchange through ADRs from the market: China Telecom, China Mobile and China Unicom are listed in this way in addition to others such as Baidu, Tencent or Alibaba.
While the former will finally be delisted from the Big Apple market, it was confirmed this week that the latter three will not be affected by the Trump administration’s ban, and will remain available to US investors until further notice. The most recent news about this blacklist confirmed, last Friday, that the mobile phone manufacturer Xiaomi will also suffer the ban, something that made a dent in its price on the last day of last week, with a fall of more than 10% from its shares in Hong Kong.
For their part, firms such as BlackRock, Vanguard or MSCI have made the decision to remove the companies affected by the veto of their benchmark indices. “The Ishares ETFs have adjusted and will continue to respond in accordance with the treatment of the indices of the securities recently affected by the sanctions against certain Chinese companies,” BlackRock noted in a statement to its clients last week.
Trump’s decision and all the noise that has arisen in the market around these companies can raise serious questions for the investor. Can he continue to invest in them? If so, what harm can Donald Trump’s order do to these companies? Will this be reversed by Joe Biden when he takes office this coming Wednesday? In the opinion of the experts, obviously this order has a direct impact on the price of the affected firms, but not so much on their fundamentals, which is why they consider that falls may be a good entry opportunity.
Falls from the veto
Losses from the moment Trump’s executive order was approved of the three major telecommunications companies that until now traded on the New York Stock Exchange remain double digits, in the case of China Mobile and China Telecom, with losses of 12.7% and 17.9% respectively in this period, while for China Unicom the fall is somewhat less, of 9.7%. And it is that from the minimum that these firms have touched in recent weeks the recovery has been remarkable, of 13.5% for China Mobile, 19.4% for China Telecom and 16.4% for China Unicom.
They are not the only companies that have been affected by the blacklisting. Others, such as Sinochem, Hangzhou Hikvision Digital Technology, China Railway Construction Corporation, Inspur Group, CNOOC or Aviation Industry Corporation of China also suffer the veto and, of course, Huawei, the company that the Trump administration has fought the most in recent years. But in the latter case, it is not listed on the public markets.
There are many voices of experts who point out that the falls that have occurred in the prices of the affected firms could be a good entry opportunity. “The investor who is invested is going to affect him negatively, but the one who is not invested is going to allow a more reasonable price to enter. If he forces himself to sell it is reasonable that they fall a lot in price, and that some fall at attractive prices which is always good. It’s an investment opportunity that can benefit the investor.
In addition, it remains to be seen what the new administration’s position will be in this regard, with Joe Biden as the country’s president, but it is possible that he will change his position. “My expectations are that Biden is less visceral, and I think the decisions that can be made will be more thought out with the new president. I think they will be more organized processes, and not overnight decisions, but it is true that he still has to prove it “.
“Now there is an opportunity”, stand out from the manager of Singapore Nuvest Capital. “While the prospects for profits go up, valuations have fallen and a great pessimism has been put in price” by the decision of the Trump administration, they add from the manager. In the same vein, from BNP Paribas AM, the manager of the French bank, the head of multi-asset quant solutions in Asia, Paul Sandhu, considers that “the fundamentals do not change, they remain what they were”, and added how “the weight of these sanctions has really fallen on the shoulders of American investors. “