A trade truce between the United States and China and the easing of restrictions on Huawei have sparked a tech rally. But not all stocks have been so lucky.
Shares in companies that do business with the embattled Chinese tech firm zoomed higher on Monday. Foxconn, which assembles smartphones for Huawei, saw its shares jump 1.6% in Taiwan, while Foxconn Industrial Internet, a subsidiary that partners with Huawei on telecommunications equipment, rose 10% — the maximum daily limit — in Shanghai.
China’s Ningbo Exciton Technology, which supplies optical films to Huawei and other tech companies, gained 5.4%. Shares in the world’s top contract chipmaker, TSMC, rose 4%. Unisplendour, one of China’s largest chipmakers, finished the session up 6.4%.
“Financial markets are showing their relief,” said Brock Silvers, managing director of China-based private equity firm Kaiyuan Capital. “Equities are up broadly, and Huawei suppliers in particular are showing renewed confidence,” he added.
Even some American companies were getting in on the rally. Major US suppliers to Huawei like Intel (INTC), Qualcomm (QCOM), Broadcom (AVGO) and Micron (MICR) moved higher in premarket trading.
Trump said Saturday at the G20 in Japan that “US companies can sell their equipment to Huawei,” reversing an export ban that had been in place since May. Huawei, one of the largest smartphone manufacturers in the world, has become a major flash point in a larger battle between China and the United States.
The American president also agreed with his Chinese counterpart, Xi Jinping, to restart trade discussions over the weekend. The developments helped spur the wider stock market higher on Monday. China’s benchmark Shanghai Composite and Japan’s Nikkei (N225) gained over 2%. Major European stock indexes opened higher.
Silvers cautioned investors against going all-in too soon.
“Celebration may be premature, as Trump can easily reinstate his Huawei ban should trade talks falter,” he said. “While both parties clearly want a deal, we’ve yet to see any evidence that remaining issues are any closer to be resolved.”
The trade truce was bad news for another key bargaining chip in the US-China trade war.
Stocks of companies that sell rare earths, minerals that are widely used in the tech industry, dropped sharply. China controls 90% of the world’s rare earth production and has indicated it could use that to put pressure on the United States.
JL Mag Rare-Earth, a top producer of the minerals, dropped 3.5% in Shenzhen on Monday. The stock has more than doubled in the past month since Xi visited the Jiangxi-based company on May 20, signaling that rare earths are a strategic resource that China wants to tighten its control over. Rival company Chengdu Galaxy Magnets fell 2.5%.
