Huawei reprieve is good and bad news for Asia tech stocks

Bloomberg

Many are expecting a relief rally after the world’s largest economies declared a truce in their trade war. In Asia, the sector that just won the biggest reprieve is tech stocks.
President Donald Trump’s decision to allow US corporations to resume sales to Huawei Technologies Co, China’s largest telecommunications-equipment maker, will boost semiconductor stocks as concerns surrounding demand for memory chips ease.
Shares of chipmakers — among the biggest contributors to the MSCI Asia Pacific Index — have been embroiled in the US and China trade conflict for more than a year. Trump’s move to cut off supplies to Huawei in May added to the sector’s wall of worry. Volatility has soared by about 300 percent since its low just before the trade spat escalated.
“The lifting of a ban on the sale of technology to Chinese companies was a step beyond expectations and the market reaction come on Monday will likely be positive,” said Kerry Craig, global market strategist at JPMorgan Asset Management by email.
Samsung Electronics Co — the world’s biggest chipmaker — and SK Hynix Inc, which are suppliers to both Huawei and US companies, may rise on Monday and in turn push South Korea’s benchmark Kospi index higher. Japan’s tech stocks and Taiwan’s Taiex index could also advance.
On the flipside, Huawei’s limited supply of imported chips that had helped boost China’s domestic producers last month amid Trump’s blacklist may slide on Monday.
Watch Unigroup Guoxin, Ingenic Semiconductor, Wuhan P&S Information Technology, Hangzhou Silan Microelectronics and Konfoong Material.
“The most fragile part of the tech sector in our view remains semiconductor names, due to the uncertainty surrounding Huawei and the entity list combined with persistent price decline in memory chips,” said Frank Benzimra, head of Asia equity strategy at Societe Generale SA.
China investors can finally turn their focus elsewhere after a highly anticipated meeting between Presidents Xi Jinping and Trump showed some progress on trade. Fund managers weren’t expecting much as the two leaders met at the Group of 20 summit in Japan. But an agreement to resume negotiations will be welcomed by investors.
Chinese video surveillance giants could rally — Hangzhou Hikvision Digital Technology Co and Zhejiang Dahua Technology Co — after the US and China agreed to resume negotiations. The US administration considered barring both companies from purchasing US technology.
Trump’s brief crossing of the North Korean border in the Demilitarised Zone and an agreement to restart stalled nuclear talks in a historic meeting with Kim Jong-un may also move defense-related stocks:
Watch auto stocks as Japan and the US agreed to speed up trade talks after Trump last month threatened to raise auto tariffs on Tokyo. The US is Japan’s largest export market after China and its biggest car customer. As disputes over wording on climate change and trade became a focus at the G-20, a Japanese stock that could bear the brunt of any issues on this front is Hitachi Zosen.