Thurston: Tariff pause brings a wait-and-see attitude to Chinese markets

Key Concepts:

• Chinese Equities
• Tariffs (US-China Trade)
• Chinese Tech Companies (Huawei, Meituan)
• Deflationary Pressure
• New Consumption Themes (Jewelry, Collectible Toys, Skincare, Travel)
• Electric Vehicles (EVs)
• Domestic Competition

Chinese Equities and Tariff Pause:

• The market largely anticipated the tariff pause due to the complexity of US-China trade negotiations.
• The extension of negotiations implies that many details still need to be resolved, leading to a "wait and see" attitude among investors.
• The temporary tariff pause, preventing tariffs from increasing to 140% for another 90 days, is not expected to cause a massive rally.

Beneficiaries Beyond Tech:

• Focus should be on growth segments within China, despite deflationary pressures on domestic consumption.
• New consumption themes are emerging, driven by younger generations and a broader demographic.
• Examples include increased spending on jewelry, collectible toys, skincare, and travel.
• This trend is fueled by the challenging economic backdrop and future unemployment prospects, leading individuals to "indulge themselves."

Electric Vehicles (EVs):

• The EV market in China is a significant driver of the economy, with exports playing a role.
• The primary concern for Chinese EV producers is domestic competition.
• Many EV producers are developing high-quality, advanced products with excellent user experiences.
• The focus is on the competitive landscape within China rather than the impact of tariffs on imported components.

Conclusion:

The Chinese equity market's reaction to the tariff pause is muted due to the anticipation of the event and the ongoing complexity of trade negotiations. While tech companies are often in focus, growth opportunities exist in new consumption themes driven by changing consumer behavior. The EV market remains a key area, but domestic competition is a more pressing concern than tariff-related import issues.