21-11-2018

The US-China trade war is now escalating to an export ban of technology from imposing tariffs. The Department of Commerce’s Bureau of Industry and Security (BIS) is examining the possibility of controlling the export of 14 categories of advanced technologies including chipmaking technology, artificial intelligence, etc. Also, Congress enacted the Export Control Reform Act (ECRA) earlier in the year, which authorizes BIS to establish appropriate export controls on emerging and foundational technologies. These new controls could have a major impact on the vast majority of big tech companies in China, especially telecommunications companies which rely heavily on U.S. technology and components to produce their chips. The tech-limiting measures are likely to lead to a bigger hit to the future prospect of the industry than imposing tariffs. Furthermore, leaders of the Asia-Pacific Economic Cooperation group (APEC) failed to agree on a communique for the first time in their history as US-China divide deepens, which further sours China-US ties ahead of the forthcoming Trump-Xi meeting at the G20. We believe the equity market will remain volatile until there is a significant progress on resolving trade dispute. Further reducing positions in equities are recommended if market presents a decent rebound.

Reference:
Bloomberg
HK Economic Journal
HK Economic Times

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