fbpx

Trade War Investing – Opportunity or Ticking Time Bomb?

Almost a year ago, U.S. implemented its first China-specific tariffs as the US Customs and Border Protection (CBP) began collecting 25% tariff on 818 imported Chinese products worth US$34 billion.

Of course, nobody realized back then that it was only the beginning of an ever-escalating trade war that would still rage on a year later.

Today, after a year’s worth of back and forth tit-for-tat, the trade war shows no sign of ending anytime soon.

If anything, it seems to be heading for the opposite direction.

And like an average Netflix drama series, the plot thickens.

Not only had the U.S. decided recently to put Huawei on its Entity List, which bans all U.S. exports to the world’s third biggest mobile vendor,

the country also seems to be considering slapping the same sentence on global market leader for CCTV cameras, Hangzhou Hikvision Digital Technology that is listed in Shenzhen Stock Exchange.

On top of that, just recently the U.S. took it a step further and introduced a bill that could potentially affect all foreign companies that are listed in the U.S. stock exchange, especially Chinese companies.

In a move that is said to protect all shareholders, the lawmakers in Washington have proposed to delist foreign companies listed on the U.S. stock exchange should they refuse to let regulators access their audit reports.

Over the years, Chinese companies like Alibaba, JD.com and Baidu have been exempted from this treatment…

And it looks like they are not about to start letting the regulators in now.

Tech giant Alibaba is already looking to go another way at the Hong Kong Stock Exchange as they prepare for the worst, and they could be only the first of many Chinese companies.


HOW THE DRAMA AFFECTS YOUR INVESTMENT

Clearly, the trade war is not going to end anytime soon,

which means, your investments could also potentially be in jeopardy, especially the ones in US and China.

The proposed bill, even though meant to protect shareholders, may cause business instability throughout the process.

And should the bill pass and the companies decided to move to another exchange, shareholders may need to sit through at another round of uncertainty.

Once THAT is done and dusted, there still remains the question about their audit reports’ integrity, as they were not treated by regulators.

On top of that, with U.S. slamming the door in Chinese companies’ faces, one at a time, it could be a matter of time before they manage to take a business down altogether.

WHAT YOU CAN DO FOR YOUR PORTFOLIO

That being said, not all is lost because there is always something you can do to save your investment.

In fact, this could even be your chance to grow your portfolio and bring it to greater heights if you do it right.

1. Look beyond the product

Just like how an atom makes up everything, every product is made of an accumulation of different products.

For example, just recently we learned that Huawei’s microchips are made by suppliers like Qualcolmm Inc, their glass by Corning Inc. and the operating system, Android, is by Alphabet Inc., better known as Google.

By looking beyond the products and into the components they’re made of, we would have a better idea of the companies which may be affected.

To draw another example, now that we know the U.S. is looking to ban Hikvision, perhaps it is wise to find out the U.S. companies that are possibly contributing to Hikvision’s manufacturing process.

2. Look outside the drama

Throughout this saga, various big companies from different industries took a hit or were somehow dragged into the situation.

However, this is ALSO a chance for us to look OUTSIDE the tunnel and find other companies within the industry (perhaps even better ones that’s been flying under the radar)

If these big companies are cut off, who would everyone turn to?

For example, Taiwan’s homegrown brand, Vivotek Inc. is one of Hikvision’s contender within the security industry.

And let’s not forget Amazon-owned home security company, Ring (formerly Doorbot).

As for mobile phone sales, with Huawei out of the picture, Samsung may just be the company to benefit the most from this whole incident.

If you happen to have WealthPark Premium, you can even easily find the industry contenders using the “Peers” tab.

3. Look under the rug

With some of these companies refusing regulatory access for their audit reports, it is safe to assume that some shareholders may feel unsettled thinking about what’s behind the curtains.

And who can blame them?

After so many news of forgery, embezzlement and under-the-table transactions, they are rightly to be worried.

There are, however, some aspects that we can look into on our end to ensure our investment is still in the right hands.

We can never fully know whether the company’s management may be exposing you, as the investor, to higher investment risks.

However, it may be worth to look at some common areas, like goodwill and intangibles, which are usually created during company acquisitions and highlights the difference between the transacted price and the net asset value of the acquired company.

For example, not too long ago Kraft Heinz made news when they wrote-down $15.4 billion of its Kraft natural cheese business.

Some of this information may be found on their financial reports, although it may require a little more analysis after you obtain the data.

But by knowing this piece of information, you can better decide whether to continue investing in a company or not, even if it means sitting through the excruciating drama.

If you are a WealthPark Premium user, you can easily find this information under “WP Rating”.

They say when life gives you lemons, you make lemonade out of them.

The trade war, while full of uncertainty and puts the world’s economy in precarious position, has a silver lining.

As long as we know where to look, there are always opportunities awaiting.

On another note, to cater to popular demands during this exciting period, our team have decided to share about investing in the U.S. market and how you can go about doing that.

Stay tuned for our article next week to find out ways you can invest in the U.S. market and some of the best platforms out there!

Not a WealthPark user yet?
Get your 7-day Trial here​

Disclaimer: All facts and opinions presented are for educational purposes only. This is not a recommendation to buy or to sell. The author(s) involved in the writing of this piece do not have current vested interest of the company. Please consult a competent professional for expert financial, or other assistance or legal advice.

Receive FREE Case Studies In Your Email

Join our mailing list to receive the latest updates and company case studies from our team.

Stock Investing is Smarter, Faster and Easier with WealthPark.

We have received your interest to subscribe to our newsletter.
Please check your email for verification

 

 

Yen Hung Chua

Yen Hung Chua

I became an advocate of money management and value investing at the age of 27 for a simple reason. Money management, investing and MOST IMPORTANTLY, emotional stability – was never something that was taught in school. We end up a bunch of workers who are taught to only work for money but not the other way around, and to treat investing like a game of chance. And it was time to change that. Being with WealthPark, not only do I have the opportunity the spread the money-consciousness further and wider, but the platform on its own, is also wickedly useful for anyone who wants to invest in stocks.

Leave a Reply

Check your email for the download link

Scroll to Top