SHANGHAI (Reuters) – As US investors dump shares in Chinese companies blacklisted by outgoing President Donald Trump, bargain hunters in China are taking the opposite side of the trade, waiting for a Joe Biden presidency to lift the investment ban stop.
On November 12, Trump signed an executive order governing U.S. investments in U.S. companies allegedly owned by the Chinese military.
The outgoing US president is considering expanding the blacklist of 35 companies to Alibaba and Tencent.
While US investors are in a hurry to sell shares in the sanctioned companies and their subsidiaries before the executive order takes effect on January 11, Chinese investors are entering.
Since the order was announced, Chinese mainland shares in the Hong Kong-listed shares of China Railway Construction Corp (CRCC) and CNOOC Ltd via the China-Hong Kong Connect have nearly tripled, according to exchange operator Hong Kong Exchanges and Clearing Ltd.
Other blacklisted stocks, including railroad equipment maker CRRC Corp., China Communications Construction Co. and semiconductor giant SMIC, also experienced heavy cash inflows.
Zhu Haifeng, a veteran Chinese retail investor, said he had hunted down CNOOC and CRRC, both of which have lost up to 27% since the Trump order.
“These are globally competitive companies and are China’s ‘name tags,'” Zhu said, which has a limited impact on the fundamentals of US sanctions.
Wan Chengshui, portfolio manager of Golden Eagle Fund Management Co. in Hangzhou, said he plans to increase his stake in Tencent as prices fall further.
“Trump has politicized everything in the name of national security. “When Biden takes office, I think things will start for the better,” Wan said, predicting that Trump’s executive order would be null and void and that sanctions against Tencent and Alibaba would not materialize.
Wan is not alone.
When Tencent fell nearly 5% in Hong Kong on Thursday after the news of the potential blacklist, Chinese investors plowed a net HK $ 4.6 billion ($ 593.29 million) into its shares via a cross-border trading channel, which it most actively traded stock makes the scheme that day.
Global index publishers MSCI, FTSE Russell and S&P Dow Jones Index have all tried to blacklist the effects of their global benchmarks, forcing passive investors to drop their investments.
Phillip Wool, head of investment solutions at Rayliant Global Advisors, said investors can find bargains if active investors plunge stocks to passive outflows in the foreground.
“Non-US investors will look at the prices of the shares that are falling and at some point decide that this is a buying opportunity,” Wool said.
Uncertainty, meanwhile, hangs over the scope and implications of Trump’s executive order, while the gradual expansion of the list is still a mystery, Wool said.
Therefore, there is also a potential opportunity for active investors to convince the rest of the market about how the political situation will unfold. ‘
After the New York Stock Exchange turned around twice this month, he said he would remove three Chinese telecommunications companies.
Since the NYSE’s first delisting announcement on January 1, Chinese investors have been determined buyers. The continent’s holdings under Connect in China Mobile Ltd, China Telecom Corp Ltd and China Unicom Hong Kong Ltd, increased by 37%, 28% and 41% respectively.
($ 1 = 7.7534 Hong Kong dollars)
Reporting by Samuel Shen and Andrew Galbraith; Edited by Vidya Ranganathan and Kim Coghill