Deutsche Bank Says Never Mind Trade Tensions, Buy China Stocks

Bloomberg.com — Bubbling tensions between the world’s top two economies over tariffs pose no bar to diving into Chinese stocks, unless a full-blown trade conflict breaks out, according to Deutsche Bank AG.

The U.S. is on course to release its final list targeting $50 billion of Chinese imports with tariffs by June 15, with the levies taking effect soon after. And China’s government said on Sunday the tariffs could scuttle progress made so far in talks. Next steps are unclear, following Commerce Secretary Wilbur Ross weekend meetings with negotiators in Beijing.

The rhetoric isn’t troubling Deutsche Bank strategist Will Stephens. The MSCI China Index is one of the most domestically geared gauges globally, with revenue exposure to the U.S. just 2 percent — meaning stocks in the benchmark shouldn’t bear the brunt of trade tensions, according to Deutsche Bank.

“We’ve been relatively sanguine about it,” he said in a telephone interview Wednesday, adding that the volatility would provide entry opportunities to buy stocks in Asia. That view hasn’t changed after statements from the Chinese government during the weekend, he said on Monday. The main risk of impact is to overall sentiment towards markets, he said.

“In a very aggressive trade war, that would have implications for the economy, but that’s not our base case,” the Hong Kong-based Stephens said.