Last Friday, President Donald Trump announced unexpectedly that the US will, starting from 1 September , impose a 10% tariff on USD 300 billion worth of Chinese goods that were free of tariff previously. Officials from the People’s Bank of China (PBOC) blamed the US for such unleash of new tariffs and unilateral trade protectionism. The PBOC allowed the weakening of yuan to go below CNY7/USD, a psychologically important level for the stability of the currency. This may signal a preparation of further yuan depreciation and may lead to a new currency war. The yuan has already depreciated more than 10% against USD since the kickoff of the trade war in March 2018. As of yesterday, the yuan has dropped to the lowest level at CNY 7.0586/USD in 11 years. In view of the expected downward pressure in the equity markets, we recommend to underweight stocks with high exposure to currency risk, especially exchange rate risk between CNY and USD, including Chinese property developers, Aviation companies and Paper Manufacturing companies. On the other hand, we recommend to overweight stocks and sectors with positive fundamentals at attractive valuation should the market continue to drop, including Pharmaceutical companies, Chinese Insurers and Property Management companies.


General Disclosure and Disclaimer
Frontier Capital Management Limited (“FCM”) is a subsidiary of Frontier Financial Group (“the Group”). It is regulated and licensed by Hong Kong Securities and Futures Commission, also is an Exchange Participant of The Stock Exchange of Hong Kong Limited, and a Direct Clearing Participant of Hong Kong Securities Clearing Company Limited.
The information contained in this website is for informational purposes, and does not intend to recommend, invite, offer, or confirm of any terms. Based on the sources that are believed to be reliable, FCM attempts to provide accurate, complete, and up-to-date information and analysis. However, FCM cannot represent or guarantee its accuracy, completeness, or timeliness of such source and information. Before making any decision on your investment, you should weigh the provided information carefully and bear any responsibility and risk incurred. And you should seek for advice of a professional financial advisor.
The Group, its subsidiaries and connected persons may have held some of the equity securities mentioned in this article, but the Group and FCM will place your financial interests ahead of their own.