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Stocks to keep an eye on as talks between the US and China unfold

Chinese President Xi Jinping. Photo: REUTERS/Alexander Nemenov/Pool

Chinese President Xi Jinping. Photo: REUTERS/Alexander Nemenov/Pool

Published Nov 15, 2021


By EasyEquities

RECORD inflation data, oil prices through the roof, crypto currencies on the surge, Covid-19 waves, new variants, old variants … how do we keep up! Given all the moving parts, market turbulence, and the endless number of factors that an investor must navigate, it is easy to overlook important headlines.

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One of these headlines that might have been the last thing on investors’ minds, and might deserve more attention, are the US-China trade talks.

A subject that has dominated the headlines pre-Covid and has taken a back seat until now. The past month has seen an increase in activity, including the Biden administration defining its policy regarding the trade relations with China. Without boring you with too many details and figures, we will outline a quick summary of what the US-China trade talks are, a few important dates, as well as stocks to watch as these trade talks unfold.

The US-China Trade talks, also referred to as the US-China Trade war, is a series of tariffs and trade barriers set in place by the Trump administration in January 2018. Mainly focusing on “unfair trade practices and intellectual property theft” as described by the Trump administration.

China did not take kindly to these tariffs, which sparked a series of retaliatory actions from both parties reaching a boiling point in 2019. In January 2020 the US and China came to a phase one agreement, but the relationship remained fragile with some regarding the trade talks as a “failure”.

After the victory over Trump and the Biden inauguration in January this year, the market reacted positively, seeing it as a positive step towards a better relationship with China.

This was, however, short-lived as Biden made it clear that he intends to keep the Trump tariffs in place and that he will push for more favourable trade agreements between the two countries. What followed was a series of sanctions and tariffs on China by the US, weakening an already fragile relationship.

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After the back and forth and rising tension, the US and China decided to have their first “trade talks” since Biden took office. The trade talks took place on May 26 and went surprisingly well, showing some light at the end of the tunnel. The outcome of the meeting is best summaried by the statement from China’s Ministry of Commerce which read: “The two sides agreed that the development of bilateral trade is very important.”

Why the US-China trade talks have recently become an important topic is an expected upcoming meeting between President Joe Biden and the Chinese President Xi Jinping.

What has had investors upbeat about this meeting are recent comments from Xi Jinping such as: “Both countries will gain from co-operation and lose from confrontation” and “Following the principles of mutual respect, peaceful coexistence and win-win co-operation, China stands ready to work with the US to enhance exchanges and co-operation across the board”.

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Could this mean a step in the right direction and possibly improved market sentiment? Investing in the Chinese market is, however, a different kettle of fish. Stocks to watch during this turbulent period:

Alibaba (NYSE: BABA); Baidu (Nasdaq: BIDU); (Nasdaq: JD); Nokia (NYSE: NOK).

We will be monitoring the upcoming meeting to see if Xi Jinping’s comments lead to better trade relations between China and the US.

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EasyEquities is an online investment platform.

*The views expressed here are not necessarily those of IOL or of title sites.