US China Trade War Archives

China may need to make significant compromise to end the US-China trade war. The worst is once US has the first big bite in Round 2 of negotiation, it might continue to ask for more advantages in future. In fact, US and China have reached agreements a few months ago in Round 1 discussions but it has been forgotten easily.

Should China shows its strength or weakness, this is a Trillion dollar question. It is a mind game as US may not want to end up with lose-lose situation as well, especially mid term election is coming soon. Ideally, US may hope China could be similar to Japan, compromise as a follower for decades.

China has 3 main wild cards:

1) Ability to endure, use Lose-Lose situation to fight back US

2) Financial (Foreign Reserve / US Debt / RMB Depreciation …)

3) Political (International Alliance – BRICS + emerging markets / WTO / 50% opponents of Trump in US / US businesses have significant gains in China market…)

In the current US-China trade war, 50% of the world (except US) is affected. Both China and Hong Kong stock markets are technically bear markets considering stock indices have dropped more than 20% over the past 1 year.

There are 3 main stock strategies for the current market:

1) Momentum trading for US stocks (buy high sell higher)

2) Shorting for stocks with bearish trends (emerging markets)

3) Crisis investing for undervalue stocks (especially China & Hong Kong)

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The US China trade war has become real and escalating to a bigger scale with time. As a result, global stock markets suffer, including China Shanghai index is at low optimism < 25%. US is the only major economy which still has bullish stock market (S&P500 is still above 2700 points) for short term. Other global stock exchanges in Asia, Europe, etc, are bearish in short term, global investors are worrying if this may trigger the next global financial crisis.

China has several lose-lose options to fight against US, including depreciation of RMB (inflation would be rising then, a potential monster for China) and the worst case, selling or dumping of US treasury bond, both elephants of US and China would get injures this way when global bond market may be crashed.

China starts to understand the consequence of depending on external markets after joining WTO about 20 years ago. It gains more foreign capitals but lose the strong control as last time. In a longer term, China has to form stronger alliance with other countries such as Europe, South-east Asia, etc, One-Belt-One-Road project is moving in the right direction but not timely for current political crisis. China also needs to speed up internal capability development in advanced technology (eg semiconductor, high speed computing, AI, 5G, etc), financial strength (currency, stock, etc), military, and ensure sufficient critical agricultural products such as soya bean (start to grow itself but not enough to cope with current demand if supply from US is reduced during trade war).

Every 100 years or so, there is usually a change in super power at country level (eg. from Spain to British to America over the past few hundred years), there is a strong trend for China to emerge as the next challenger for US as No 1 economy after unsuccessful rise of Japan and Europe over the past few decades. In the ancient time, real wars may be occurred before the new super power could take control. In the modern time, the “war” could be more complicated: political or financial (trade, economy, stock, currency, bond, commodity, etc) but the consequence could be as severe as real war.

Crisis is usually an opportunity, especially at country (Level 3) and world (Level 4) levels. A stock trader and investor may position differently to profit from this once a century trade war between 2 super power.

As a trader, trend following is crucial. To long (buy low sell high), the only stock market with higher probability is US. If not, shorting (profit when share price is falling) could be a higher probability trading for other global stock markets in short term. Alternatively, a trader has an option to wait patiently for the recovery of global stock market including Singapore.

As an investor, not everyone could capture the falling knife in share prices, buying strong fundamental stocks at lower price as it still has the short term momentum which may drive lower. A smart investor has to compare the low and high of individual stock (Level 1) with the low and high of mega stock market (eg. indices, Level 3). Optimism strategies can be applied for relative comparison of stocks at Level 1 (individual business), Level 2 (sector), Level 3 (country) and Level 4 (world).

Learn from Dr Tee to position in stocks with this century investment opportunity from US China trade war. Register a free 4 hour course.

Impact of US-China Trade War on Stock Market

Century Investment Opportunity in US China Trade War

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