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Goldman: Trump Trade Risk Not Priced In; 5 Stocks To Sell
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Loading...Financial markets have not priced in a protectionist Donald Trump presidency, according to Goldman Sachs.
Look at how quickly Asia’s export-oriented companies have bounced back, “suggesting the market may not have priced in much trade risk”, wrote Goldman.
Among Asian companies with sizable revenue exposure to the U.S., Goldman dislikes Kia Motors (000270.Korea), SMIC (981.Hong Kong), Advantech (2395.Taiwan), Acer (2353.Taiwan), and Cipla (500087.India) the most. These five companies promise 34%, 32%, 29%, 26% and 26% downside respectively.
At first glance, Kia Motors should not be picked on by Trump. About 40% of its production is based in the U.S. – versus 10% in Mexico with the rest produced in Korea. Kia sells only a quarter of its cars to the U.S. However, the problem is that U.S. automakers such as General Motors (GM) and Ford Motor (F) “import much less than Asian automakers for the U.S. revenues,” notes Goldman.
SMIC is an easy target. The Chinese chip maker sells about 35% of its foundry services to U.S. companies, despite national security risks it could carry. Plus, SMIC has plenty of competitors, such as Taiwan’s TSMC (TSM).
Taiwan’s Advantech, which makes PC components and automation tools, has 29% revenue exposure to the U.S. But U.S.-based Jabil Circuit (JBL) and Flex (FLEX) are ramping up, although slowly.
Taiwanese PC maker Acer has 21% revenue exposure to the U.S. Acer is also in a declining market with plenty of competitors such as Apple (AAPL), Dell and H-P (HPQ).
India’s pharmaceutical company Cipla has 19% revenue exposure to the U.S. Trump’s intention to actively negotiate on drug prices can really hurt its businesses.
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