Impact of a Potential Trump Victory on Chinese Stocks

A Donald Trump victory in the 2024 presidential election is expected to trigger a sell-off in Chinese stocks, potentially leading to increased fiscal stimulus from Beijing, according to a note from JPMorgan.

Trump's strong rhetoric against China includes promises to impose steep trade tariffs if elected, which would likely create more economic pressure on Beijing. This could prompt the Chinese government to implement supportive measures.

JPMorgan analysts indicated that a "Trump 2.0" scenario would result in a more aggressive Trump, increasing tariffs and utilizing policies to "escalate to de-escalate." The initial market reaction would likely be a sell-off, with expectations for retaliatory measures from China.

Following a Trump victory, Beijing may be compelled to introduce more stimulus to stabilize local markets, boost demand, and enhance Chinese self-sufficiency. JPMorgan recommended China Galaxy Securities (SS:601881) and Semiconductor Manufacturing International Corp (HK:0981) as preferred picks in this scenario.

Conversely, they noted that a Kamala Harris victory could enhance risk appetite for China, favoring export-oriented stocks. Top picks in this scenario include Qingdao Haier Co Ltd (SS:600690) and Midea Group Co Ltd (SZ:000333).

As Trump and Harris engage in a tight race, focus this week also centers on a meeting of the Standing Committee of China’s National People’s Congress (NPC), where plans for expanded fiscal spending are anticipated. Analysts speculate on a proposed new spending figure of at least 10 trillion yuan ($1.4 trillion).

Despite recent monetary and fiscal stimulus measures announced by Beijing, further details on their scale and timing remain uncertain.