Asia's Wealthy React to Huawei Impasse
Huawei, the Chinese technology giant at the epicenter of the Sino-U.S. trade war, may be a privately held company but fears of collateral damage have the world’s wealthy scrambling for cover.
Investors globally are hedging their equity portfolios for exposure to impacted stocks in the short term while at the same time trying to understand whether their core businesses may suffer over the longer term.
«The impact on equities is the wider threat,» says one Hong Kong-based investment advisor, «stocks like Xilinx and Qualcomm are popular investments. A smaller sub-section of clients are worried about the impact on their core businesses,» he adds.
More Than Just Chips
UBS analysts expect industry earnings may drop by low single digits for Asia tech businesses and mid to high single digits for Taiwan tech businesses. «But it is more than just the chip manufacturers,» the advisor cautions.
Few Asian tycoons could ring-fence businesses that are U.S.-dependent, even real-estate conglomerates with local land banks as their primary asset invested in technology businesses a few years ago as a means of diversification.
Credible Risks
«Even clients with no technology exposure have some reliance on U.S. trade for their core business, likely a manufacturing concern,» says the advisor who believes it is the primary cause for concern – and the topic of conversation – amongst private banking clients today.
«The risk of talks breaking down is credible,» says Eli Lee, head of investment strategy at Bank of Singapore, who sees a «one-in-three chance» of it happening. Whilst the office of the U.S Trade Representative (USTR) has initiated the process for imposing up to 25 percent tariff on other Chinese imports worth $300 billion, a potential trade agreement could be agreed upon at the G20 Summit taking place in Osaka on the 2-29 June.
Worse May Be Ahead
«This has gone beyond posturing though,» says one London-headquartered Asian family office executive who says it is unlikely the Trump administration will be able to affect a volte-face at the summit. «The narrative is the local [Chinese] media has been turned up, a sign that the administration is also preparing to dig its heels in for the long haul.»
