BEIJING — A ban on U.S. investment in Chinese tech could drive up market volatility — however some sectors could escape untouched, Financial institution of America analysts mentioned.
The White Home is reportedly contemplating an executive order to ban U.S. investment into high-end Chinese tech, similar to synthetic intelligence, quantum computing, 5G and superior semiconductors, in keeping with a Politico report final week.
It is unclear whether or not or when such a rule may take impact. The report indicated ongoing inside debate inside the U.S. authorities.
“If there were a strict investment ban on US investors, it could create a significant supply of shares over the grace period and hence potential large volatility in the near term,” Financial institution of America’s Hong Kong-based analysis analysts mentioned in a notice Tuesday. “Potential long-term impact is less clear.”
“Though AI is quite prevalent in today’s online world, companies that don’t have a large business in external AI solutions [will] likely see a lower chance [of] being targeted by the U.S. side,” the analysts mentioned.
“Online travel companies, pureplay game and music companies, online verticals in auto and real estate, niche eCommerce specialties, and logistics-focus eCommerce companies are some of the examples,” the Financial institution of America report mentioned.
The analysts didn’t title particular shares.
Chinese shares have not too long ago tried to rebound after a plunge within the final two years.
The nation ended its stringent zero-Covid coverage in December. Within the second half of final yr, the U.S. and China additionally reached an audit deal that considerably lowered the chance Chinese firms must delist from U.S. inventory exchanges.
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Among the U.S.-listed Chinese shares with the most important U.S. institutional investor possession on a share foundation included KFC operator Yum China, livestreaming firm Joyy and pharmaceutical firm Zai Lab, in keeping with a Jan. 25 Morgan Stanley report.
Semiconductor business firm Daqo New Vitality had almost 27% U.S. institutional possession, Morgan Stanley mentioned.
The info confirmed Alibaba had essentially the most U.S. institutional possession by greenback worth, nevertheless it solely accounted for 8.2% of the inventory.
In a separate report Monday, Morgan Stanley fairness strategist Laura Wang identified the Biden administration has centered on focusing on tech with ties to the Chinese army.
She famous indicators of stabilization within the U.S.-China relationship, together with U.S. Secretary of State Antony Blinken’s deliberate go to to Beijing within the coming days and the potential for Chinese President Xi Jinping to go to the U.S. in the course of the Asia-Pacific Financial Cooperation Leaders’ Summit — set to be held in San Francisco in November.
The White Home and China’s Ministry of Overseas Affairs didn’t instantly reply to a request for remark on the Politico report.
— CNBC’s Michael Bloom contributed to this report.