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Fidelity International Predicts Domestic Demand Orientation to Shield CN Telecoms From Direct Impact of US Tariffs
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Regarding the impact of the upcoming US reciprocal tariffs on the China and US telecom service industries, Ian Samson, fund manager at Fidelity International, noted that both industries enjoyed exponential earnings growth over the past two years, and many companies with leading communication technology and AI skills have promising outlooks and are expected to remain shielded from the direct impact of the China-US trade policies. However, the US telecom industry is currently facing a bear market, while China's telecom industry is still in a bull market. Consequently, investing in both concurrently might be an ideal strategy in a volatile market given the starkly different market trends. Specifically, China's telecom industry has not encountered market headwinds recently, and Chinese telecom stocks have recorded double-digit gains YD. The popular ETF tracking related tech companies, KraneShares CSI China Internet ETF (KWEB), has surged over 20% YTD, marking an increase of nearly 50% since September 2024. The broker also noted that Chinese telecom stocks had suffered from several years of downturn. Companies like TENCENT (00700.HK) and NTES-S (09999.HK) that showed strong earnings improvements were overlooked by the market for several quarters, with their valuations hitting rock bottom. It was not until September 2024 when the Chinese government introduced a series of economic stimulus policies that Chinese telecom stocks began to rally with the market. Earlier this year, the Chinese startup DeepSeek launched its low-cost, high-performance AI model, prompting the market to no longer view this as a short-term rise. Investors realized that many large Chinese telecom and internet companies are likely to benefit from AI development. Chinese leaders also held a private sector meeting subsequently with representatives of well-known tech companies in order to reinforce the market's view that the industry is supported by China's policies and has structural growth prospects. Even though Chinese telecom stocks have risen, similar earnings growth trends in the US or European markets are often accompanied by higher valuations. It is noteworthy that the domestic demand orientation of Chinese telecom stocks should shield them from the direct impact of US tariffs. AAStocks Financial News |
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