Amid the backdrop of a global economic cooldown, traders anticipate the upcoming meeting between President Joe Biden and China's Xi Jinping at the APEC summit to possibly signal a détente in the strained U.S.-China relations, especially concerning technology and trade. Xi's first visit to the U.S. since 2017 could mark a turning point, potentially revitalizing interest in China's assets, as the country grapples with a property crisis and the yuan hitting a 16-year low against the dollar. An improvement in bilateral relations, even modest, could bolster investor sentiment significantly, said Xiaojia Zhi of Credit Agricole CIB.
Technology
Recent moves by both nations, such as China's significant purchase of U.S. soybeans and potential agreements regarding fentanyl and Boeing aircraft orders, point to a warming of relations crucial for investment flows. This comes as China, the world's largest semiconductor market, faces increasing U.S. sanctions on its tech sector. A softening of the tech dispute could benefit a swath of companies, from Apple (AAPL)to semiconductor giants like Taiwan Semiconductor Manufacturing (TSM), Samsung Electronics, and Nvidia (NVDA).
Green Energy
In the green energy space, a focus on shared environmental goals could trigger a surge in related stocks, such as Contemporary Amperex Technology and LONGi Green Energy. The U.S.'s push to expand domestic EV production and the EU's safeguard measures against low-cost imports could lead to significant developments for Chinese EV manufacturers like BYD if the summit leads to easing industry protectionism.
FX Implications
Currency traders are also eyeing the meeting's implications for the yuan, currently Asia's worst-performing currency. Should the Biden-Xi meeting stimulate regulatory easing and a renewal of business confidence, it could alleviate some of the downward pressure on the yuan. With the People's Bank of China maintaining a tight leash on the currency's reference rate, any positive shift in U.S.-China dynamics could introduce fresh momentum into the foreign exchange market.
