Stocks Sink as Trump Threatens to Delist Chinese Firms

Radical Escalation of Trade War

In what would be a radical escalation of the trade war, Trump Considers Delisting Chinese Firms From U.S. Markets.

President Donald Trump’s administration is considering the possibility of delisting Chinese companies from U.S. stock exchanges, a source briefed on the matter said on Friday.

The move would be part of a broader effort to limit U.S. investments into China, the source said

Shares of Alibaba Group Holding (BABA.N), JD.com (JD.O), Pinduoduo (PDD.O), Baidu (BIDU.O), Vipshop Holdings (VIPS.N), Baozun (BZUN.O) and IQIYI (IQ.O) fell between 2% to 4% in afternoon trading.

Analyst Reactions

Bloomberg reports ‘This Is Huge’ as China Threat Dents Markets: Wall Street Reacts

• Jennifer Ellison, principal at San-Francisco based BOS: “This is not little stuff. This is huge. The cost of tariffs on the economy, the impact on growth around the world when you don’t have trade flowing, the potential impact of China getting really mad and looking at us and saying ‘You know those Treasury bonds you’re issuing? We don’t want so much of that anymore,’” she said. “There’s a lot more potential downside than there is upside when this is all resolved.”
• Ed Moya, senior market analyst at Oanda: “Just like we saw in the previous lead-up to high-level talks in the past, the White House is trying to increase their negotiating chip count with a fresh threat that could cripple Chinese companies,” he said. “The limitation of American pension funds access to Chinese markets would see massive portfolio swings that spells disaster for the tech sector. This threat is harsh reminder that we could very easily see trade talks fall apart next month.”
• Ed Al-Hussainy, a strategist at Columbia Threadneedle: “This one is a non-starter. Even this administration will have a hard time making the case for capital controls at this scale. Just another market burp.”
• Alan Ruskin, chief international strategist at Deutsche Bank AG: “This policy risks reciprocity from China, where China is of course a much bigger player in U.S. portfolio markets, than the U.S. is in China. In general, headlines like this also suggest that U.S.-China relations remain extremely tense, so not a great sign on the state of the trade negotiations. These headlines help assets that do well in ‘risk-off’ like gold, Swissie and yen. The euro likely also benefits in part as China could in theory search for alternative liquid markets,” he said. “One important caveat to above is we need to see if these are just loose headlines with U.S. capital flows used as a bargaining chip, or whether the threat is real.”
• Mike Collins, senior portfolio manager at PGIM Fixed Income: “It’s another example of how every time people think this trade war is deescalating, it escalates again,” he said. “We’re in this for the long run. There’s no end in sight.”
• Sebastian Janker, the head of the chief investment office for DB Wealth Management Americas: “The lack of details for implementation could signal that this is another negotiating tactic for the White House to use in the upcoming trade talks. It’s hard to imagine exactly how such a policy could be enacted without hurting existing investors,” he said. “Investors should monitor the price action in U.S.-listed Chinese companies as proxies for measuring the propensity of enacting this potential new regulation.”

Another Trumpian Bluff

I emphasized what I thought were the best comments. Mike Collins and Ed Moya are closest to my view.

These on again off again trade war disputes seem never-ending.

Jennifer Ellison missed the mark. This “isn’t” huge, at least yet. But yes, it “would be” huge if Trump actually did it. The rest of Ellison’s comments are nonsense. Any China treasury dumping play would backfire quickly, on China.

This is yet another obvious bluff by Trump.

China won’t be fooled.

Mike “Mish” Shedlock