Investors have become so accustomed to the bilateral tensions that higher tariffs, as threatened by Trump, may no longer deliver a major shock. —Reuters
SHANGHAI: As the US presidential election nears, investors in Chinese stocks are zeroing in on the prospects of key sectors that look set to remain in the crosshairs of the White House, whoever wins it.
From solar panels to electric cars and biotech, Chinese firms in some of the world’s fastest-growing industries will likely keep suffering from heightened trade frictions with the United States, whether Donald Trump or Kamala Harris becomes the next president.
That said, investors have become so accustomed to the bilateral tensions that higher tariffs, as threatened by Trump, may no longer deliver a major shock.
Instead, traders are looking toward additional stimulus, which may be approved by China’s legislature at a meeting that overlaps with the US vote next week, to counter any post-election headwinds and extend a rally in the world’s second-largest stock market.
Any new measures by Beijing to bolster industries pivotal to the nation’s drive to become a high-end manufacturing powerhouse may also revive optimism.
“The Chinese government does have a lot of tools at its disposal depending on what steps might be taken by the United States,” said Martin Dropkin, head of Asian equities at Fidelity International.
“We always have to go back to fundamentals and think about what sectors have the most organic growth opportunity and the most earnings positivity going ahead.”
Here are some of the sectors closely watched by traders in the run-up to the US election:
Solar
Chinese solar firms, which dominate the global market, have been a key area of contention between Beijing and Washington in recent years.
US rivals have complained that their Chinese counterparts were selling products below cost to gain the competitive edge.
Such scrutiny, as well as record-low prices, had weighed on the stock prices of Chinese solar manufacturers including Trina Solar Co and Xinyi Solar Holdings Ltd for much of the last two years.
They staged a rebound earlier this month following reports that the United States is considering reducing tariffs on the sector.
Expectations that Beijing will move to tackle oversupply of a key material extended the rally.
Still, Trina Solar remains down 10.8% this year, while Xinyi Solar has shed 16%.
Solar stocks are “way too cheap,” with some falling close to a fifth of their valuation from a 2022 peak, said Park Soojin, China equities analyst at Mirae Asset Securities Co.
“The stocks are passing the trough with expectations of a rebound in demand and easing of vicious competition.”
EVs and batteries
Also at the forefront of the Sino-American trade spat are Chinese electric car makers.
President Joe Biden’s administration has quadrupled duties on electric vehicles (EVs) made in the Asian nation to more than 100%. Just this week, the European Union (EU) also imposed higher tariffs peaking at 45% on EVs from China.
Behind the punitive measures by the United States and EU are fears that China will dominate EV production with cars that are both cheaper and more attractive in design to consumers than peers.
Since introducing a new battery technology in 2020, BYD Co –the leading Chinese EV brand –has gone from being one of many producers in a crowded domestic market to cracking the top 10 automakers in the world.
BYD’s Shenzhen-listed shares have surged 54% this year.
“Exports are still the way they go,” said Ivy Ng, chief investment officer for Asia Pacific at DWS.
“Even if you take into account the tariff that Europe is proposing, the margin of some models is still relatively higher than what they can get in China.”
Batteries used to power EVs are also under US scrutiny, with tariffs on lithium-ion batteries rising to 25%. Non-EV lithium-ion batteries will see the same jump in 2026.
The world’s biggest maker of EV batteries, Contemporary Amperex Technology Co, has limited US exposure. Its shares have risen 52% since 2024 began.
Biotech and healthcare
Chinese biotech firms from WuXi AppTec Co to MGI Tech Co have come under pressure due to concerns over a US bill seeking to block such companies from accessing federally-funded contracts.
Hong Kong-listed shares of WuXi AppTec, which makes more than half its sales in the United States, have fallen around 35% this year, with MGI’s down 41%.
Meanwhile, a surprise 50% tariff on Chinese-made syringes and needles also hit Shandong Weigao Group Medical Polymer Co, sending the stock down by 36% since 2024 began.
Nevertheless, the sector’s overall risk appears limited.
“The majority of major Chinese healthcare firms have relatively low percentage of sales derived from the American market, other than the contract research organixation players that we think would continue to be under pressure regardless of whoever wins the election,” said Nomura healthcare analyst Jialin Zhang.
Semiconductors
Chinese chipmakers have emerged as surprise survivors of increased efforts by the United States to limit China’s ability to compete in strategic sectors.
Despite years of US tariffs, export controls and financial sanctions, President Xi Jinping is making steady progress in positioning China to dominate industries of the future.
The leader’s recent remarks that science and tech should be at the forefront of Chinese modernisation have added to the optimism.
Semiconductor Manufacturing International Corp has surged 62% this year, while fellow Chinese chipmaker Cambricon Technologies Corp has risen more than twofold. — Bloomberg
