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Wealth Managers Expect Choppy Markets For Some Time

Tom Burroughes

23 May 2019

The US clampdown on China’s Huawei, coming hard on the heels of tariff hikes on the Asian country, will keep markets volatile for some time, warned that if the US-China row about Huawei escalates it could “damage tech companies not only in China but globally, including in the US”.

“Global supply chains could be reshaped as US and Chinese businesses seek to unwind their mutual dependence,” the asset management house said.

“The moves against Huawei should be seen in the context of an ongoing battle between the US and China for technological supremacy. Technology is at the heart of China’s ‘Made in China 2025’ industrial policy, which aims to spur the development of select high-tech industries for economic and national-security reasons,” it continued. 

As noted, other US actions against China include banning Huawei and ZTE from selling equipment to US telcom companies in 2012; blocking some China-linked entities from acquiring US tech companies and naming China as a violator of intellectual property laws.

Investec AM said that the US government’s moves are important because they will result in supply chain disruption. 

“Huawei consumes nearly 10 per cent of the world's semiconductor output and is a global leader in smartphones and telecommunications equipment. The company recently overtook Apple to become the world's second-largest smartphone manufacturer. It has revenues of over $100 billion and employs nearly 200,000 people,” it added. 

“The ability of US tech firms (for example Apple) to sell to China, a large and growing market for them, may be restricted. Chinese authorities are likely to retaliate, either by disrupting US firms’ ability to sell to China (eg, by withholding customs clearances or revoking operating licences) or by imposing bans on US products,” it said. “If the dispute escalates, supply chains are likely to be reshaped away from China.”