Trade War 2019: Blacklist Creating List of Opportunity

As the trade war intensified in October 2019, the Trump Administration began to blacklist Chinese companies (28 of them) over their alleged roles in human rights violations. 

Any company on the list is now barred from buying U.S. products, or from importing U.S. technologies. In fact, according to the US Commerce Department, "these entities have been implicated in human rights violations and abuses in the implementation of China's campaign of repression, mass arbitrary detention, and high-technology surveillance against Uyghurs, Kazakhs, and other members of Muslim minority groups in [Xinjiang].”

However, investors view this as nothing more than more pressure on China to bend – and that the move is creating a “blood in the streets” opportunity for involved companies, including:

Ambarella Inc. (AMBA)

AMBA fell after one of its key customers – Hikvision – was blacklisted. As one of the 28 companies the Commerce Department added to the Entity List, this move from the U.S. restricts the company’s ability to do business with American firms, says CNBC. At the moment, AMBA is a falling knife, gapping from $57.50 to $50 on the news so far.  Eventually, investors believe this will give way to opportunity on oversold conditions.

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Alibaba (BABA)

Reportedly, BABA was also blacklisted, which is why the stock gapped from $170 to $162 in October 2019. However, investors believe that once tensions begin to cool, stocks like BABA will slowly begin to recover from oversold conditions.

Advanced Micro Devices (AMD)

Shares of AMD have drifted lower, as well because the trade ban could impact sales of graphic processing units (GPUs) to Chinese customers. While the stock has pulled back in recent weeks on trade concerns, “We think the exposure is limited from a data center perspective at about 2% (or less) of total data center revenue,” says RBC Capital Markets.

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