Trade Deal Cut In Principle? Sector ETFs To Soar
Zacks Investment Research | Dec 12, 2019 08:07PM ET
The latest buzz is that the Trump administration $360 billion in Chinese products.
The agreement has supposedly been done in return of a Chinese promise to buy American farm goods, U.S. officials and others familiar with the agreement said. However, per CNBC , negotiation is still continuing on China’s farm purchases.
Whatever the case, increasing optimism about an initial level trade boosted markets on Dec 12. Three key U.S. equity gauges gained in the key trading sessions as well as in after markets. Below we highlight the sector ETFs that are going to benefit from a trade deal.
Semiconductor
Per Morgan Stanley (NYSE:MS) equity strategists, “semiconductor and semiconductor equipment companies have the highest revenue exposure to China at 5 ETFs That Deserve Special Thanks in 2019 ).
Chipmaker Qualcomm (NASDAQ:QCOM) has 65% revenue exposure to China and Nvidia’s (NASDAQ:NVDA) sales exposure to China is SMH may face trouble.
Tech Hardware & Equipment
Tech companies that have extensive trade relations with China would be at high risk of falling prey to the trade war. In fact, 14% exposed to China, per a CNBC article.
SPDR S&P Technology Hardware ETF After a Sweet November, Apple ETFs are Set for a Warm December ).
Agriculture Business
China targeted imports of U.S. agricultural products as a way of retaliation. U.S. farm exports dropped from a high of $25 billion in recent years to below $7 billion in the 12 months through May, according to Commerce Department data, quoted on Wall Street Journal . Farm exports to China started to recover in recent months as the two sides started to negotiate, but is still 60% lower than their pre-trade war peak.
The tussle built pressure on agriculture equipment makers Deere & Co. (NYSE:DE) and AGCO Corp. (NYSE:AGCO) . AGCO has about 10% exposure to IQ Global Agribusiness Small Cap ETF MOO .
Agricultural ETFs like Teucrium Corn Fund SOYB and Invesco DB Agriculture Fund (MI:DBA) should also benefit.
Auto
Both steel and aluminum are vital to the production of cars and trucks sold in America and would considerably push up the sale prices of those vehicles. U.S. auto companies earn about 12% revenues from China. With Beijing slamming tariffs on CARZ would now get some relief.
Energy
It is a double-edged sword for energy companies. First, Donald Trump’s levy of tariff on steel and aluminum imports became a pain for U.S. oil pipeline companies as it pushed up their raw material prices. On the other hand, China Time to Buy Beaten Down Oil ETFs ).
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