Investors bracing for tariff hike as trade war intensifies


GREAT TO SEE YOU.>>THANKS. PLEASURE TO BE HERE. JACKIE: LET’S START BROAD AND DRILL DOWN A LITTLE BIT AND JUST TALK ABOUT THE CHINA TRADE NEGOTIATIONS. THERE ARE MARKET INVESTORS LOOKING AT THE NEWS AND SAYING THEY THINK A DEAL IS IMMINENT. THE STOCK MARKET WOULD CERTAINLY LIKE THAT. YOUR THOUGHTS ON WHETHER THIS CAN BE ACHIEVED IN A TIMELY FASHION.>>STOCK MARKET WOULD LOVE IT. I WOULD LOVE IT. BUT I THINK IT’S PROBABLY NOT GOING TO HAPPEN. NOT IN THE NEAR TERM. YOU REALLY HAVE TO LOOK AT THE INCENTIVES OF THE DECISION MAKERS TO FIGURE THAT OUT. IF YOU LOOK AT IT FROM TRUMP’S PERSPECTIVE, TRUMP HAS TO APPEAR TOUGH ON CHINA TO HIS BASE. AT THE SAME TIME, CHINA DOESN’T WANT TO SIGN ANOTHER HUMILIATING TRADE AGREEMENT THAT HAS ECHOES OF THE CHINESE/JAPANESE TRADE AGREEMENT. THEY ALSO DON’T WANT TO SIGN AN AGREEMENT THAT DOESN’T LOOK GREAT RIGHT IN FRONT OF THE 70th ANNIVERSARY OF THE PRC. THOSE ARE REASONS YOU ARE NOT GOING TO GET SOMETHING REALLY SHORT-TERM. I THINK YOU ALSO HAVE TO LOOK AT IT FROM CHINA’S PERSPECTIVE. THEY BENEFIT FROM JUST STALLING AND WAITING AND GOING THROUGH THE ELECTIONS TO SEE IF TRUMP WINS AGAIN AND IF THEY HAVE TO CONTINUE TO DEAL WITH HIM. I THINK THE MOST LIKELY SCENARIO IS WE PROBABLY DON’T SEE ANYTHING HAPPENING, YOU SEE A LOT OF STALLING FOR THE NEXT SIX, NINE MONTHS. JACKIE: OKAY. AND YOU KNOW, IT’S WHEN PEOPLE DON’T WANT CERTAIN STOCKS THAT TYPICALLY IS THE BEST TIME TO GET IN THEM. YOU ARE STANDING BY CHINESE EQUITIES AND CITING THAT AS ONE REASON WHY, BUT IT’S HARD TO, YOU KNOW, A HARD PILL TO SWALLOW WHEN PEOPLE ARE WORRIED AND NERVOUS ABOUT THE REGION. WHAT’S ALSO INTERESTING, THOUGH, IS CHINA AT 11 TIMES EARNINGS IS A ONE OF THE CHEAPEST MARKETS IN THE WORLD RIGHT NOW. MAKE THE CASE FOR ME ON WHY WE SHOULD BE BULLISH ON CHINA.>>FIRST OF ALL, I’M NOT SURE YOU SHOULD BE BULLISH ON CHINA BROADLY. ADMITTEDLY, IT’S REALLY CHEAP, 11 TIMES EARNINGS REL TOI 11 TIMES EARNINGS RELATOI 11 TIMES EARNINGS RELATIVE TO THE U.S. BUT THERE ARE GOOD REASONS IT’S CHEAP. THE ECONOMY IS WEAK, IT’S GOING TO GET WEAKER. HOWEVER, THERE ARE SOME REALLY BRIGHT SPOTS AND POINTS WITHIN CHINA THAT YOU CAN INVEST IN. YOU DON’T HAVE TO BUY EVERYTHING. FOR EXAMPLE, CONSIDER 5G. YOU SEE CHINA IS REALLY THE LEADER IN 5G. THE MARKET’S MASSIVE. THE TOP THREE TELECOMS ARE PLOWING MONEY IN AND ACCELERATING DEPLOYMENT. THINK OF IT THIS WAY. HUAWEI ON THEIR FIRST 5G PHONE, WHEN IT WAS FIRST RELEASED, THEY GOT A MILLION ORDERS THE FIRST DAY. I THINK YOU WILL SEE A LOT OF PRODUCTIVITY INCREASE AND A LOT OF INFRASTRUCTURE BUILD FROM 5G. THINGS LIKE HEALTH CARE, RISING DISPOSABLE INCOME IS DRIVING, AND ASIAN DEMOGRAPHICS, BOTH OF THOSE THINGS ARE DRIVING INCREASE IN HEALTH CARE NEEDS IN CHINA. I THINK THAT’S GOING TO BE A GREAT PLACE. ALSO, CONSUMPTION UPGRADE. DESPITE SOME WEAK MACRO TRENDS, CONSUMERS HAVE MORE MONEY TO SPEND AND ARE WILLING TO SPEND IT. SO PREMIUM BRANDS, LIKE PREMIUM BEER VERSUS CHEAP BEER, THOSE ARE THE BRANDS THAT ARE ACTUALLY DOING WELL IN CHINA. I THINK YOU REALLY HAVE TO BE MORE SELECTIVE, YOU HAVE TO BE A GOOD STOCK PICKER AND GO INTO CHINA AND YOU WILL DO JUST FINE BECAUSE YOU ARE BUYING A VALUATION THAT IS ASSUMING SOME REALLY BAD NEWS DOWN THE ROAD. THERE ARE SPOTS THAT LOOK REALLY GREAT.

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