Ted Bauman: Trade War Helps to Make Chinese Stocks Attractive
Supporters of President Donald Trump are thrilled that he kept his campaign promise to try to even the playing field with China on the global arena. Many Americans have felt that the Chinese have been taking advantage of the United States in terms of trade for several decades. In order to punish China for stealing intellectual property, the Trump Administration placed $50 billion in tariffs on Chinese goods. President Trump has vowed additional tariffs of around $200 billion if China takes steps to retaliate. While some in the financial media are claiming that the United States is winning in the trade war, economist Ted Bauman feels the US will soon be affected by the trade war. He feels that there are never winners in a trade war. Although he has a negative view of the trade war, he feels that it has created opportunities for investors to buy cheap Chinese stocks.
With the US enjoying a bull market in stocks, most financial advisors will probably recommend to their clients to stick with US stocks. As an economist, Ted Bauman tends to look at the global economy to find opportunities. He recently pointed out that the iShares China Large-Cap ETF is down ten percent for the year and is looking more attractive than many US stocks. The ETF is weighted with some of the largest companies in China. Ted Bauman believes that the trade war between the US and China has driven these stocks down. He feels that US equities are overvalued, however, he feels that investors should sell their overvalued equities and diversify with undervalued equities.
Early in the summer, the Chinese yuan began to lose value as the trade war between the US and China intensified. As the yuan began to lose value, the stocks in China began to mimic the actions of the currency and they too began to tumble. The Shanghai Composite has dropped eighteen percent this year. Ted Bauman feels that Chinese shares have not been this cheap in a long time and sees it as a buying opportunity for investors to rotate from overvalued to undervalued equities.
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