4 stocks to watch as supply chain disruption eases with China reopening

  • Companies with operations in China will benefit from China’s decisive reopening
    ° An end to sudden lockdowns and supply chain disruptions is positive even as demand uncertainties may persist in the near-term amid the global manufacturing slowdown,

    ° With CNY holiday coming to an end, business/operations should resume swiftly on the back of soon-to-peak COVID situation, China Center for Disease Control and Prevention reported that 80% of its population has been infected in the current outbreak,

    ° The government’s pro-growth shift to revive domestic demand encourages a swift resumption of economic activities, with domestic activities to see the fastest recovery
    Monitor China PMI and China Export data for signs of recovery with the shift in zero-COVID policies, following an expected trough in 4Q’22-1Q’23

    Yantai Intl Container TermiOperated by Hutchison Port Holdings, Yantian International Container Terminal is a deep water port in Shenzhen

    Improvements in production/consumption, mobility and trade should bode well for shipping and logistics names like Hutchison Port Holdings Trust (HPHT) and Mapletree Logistics Trust (MLT)
    ° HPHT: 2Q’22 revenue contribution – CN, 74%, and HK, 26%,
    ° MLT: 1H’22 gross revenue – CN, 23%, 21%, AUM – CN

    Relief for tech manufacturers like Nanofilm and Aztech on the supply side, though waning global demand still poses as a key overhang for these stocks
    • Equities may move ahead of industry: SOX Index saw a 17% YTD return on optimism of inventory correction ending soon, and most results have yet to disappoint massively
    • Pause in the Fed’s hiking cycle as a catalyst: DBS analysts noted that recovery of the tech sector could happen as early as 1Q’23, i.e., with the peaking of the Fed Fund Rate

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