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To: Return to Sender who wrote (82294)	1/17/2019 4:40:33 PM
From: Sam	Respond to of 95473

These Stocks Have the Most to Gain as U.S., China, Talk Trade -- Barrons.com DOW JONES & COMPANY, INC. 12:50 PM ET 1/17/2019 The latest developments in the U.S.-China tussle gave investors a bit of good and a bit of bad news, offering a window into how the relationship may progress over time beyond the current trade spat. On one hand, China appears to be rushing to make a concession to the U.S. by speeding up the review of a draft of an investment law that vows to protect foreign companies' intellectual-property rights and bans technology transfers. Those are key issues the U.S. has raised with China, though whether a deal will result depends on the details, which aren't clear. The accelerated pace comes as China says its economy czar will come to Washington, D.C., to meet with U.S. officials at the end of January. "The feedback we are getting is that the Chinese are ready to make a deal," says Alberto Fassinotti, a portfolio manager for emerging market equities at global investment manager Rock Creek Group. " This is a headache for them above everything else." The everything else, of course, is China's struggle to manage its economic slowdown without creating turmoil. While there is an effort to ease frictions, things are heating up on another front as federal prosecutors investigate allegations that China's Huawei Technologies stole trade secrets from the likes of T-Mobile. Huawei declined to comment to The Wall Street Journal. The investigation follows the Dec. 1 arrest of Huawei CFO Meng Wanzhou -- the daughter of Huawei founder Ren Zhengfei, in Canada at the request of U.S. authorities, who accuse her of lying about the company's business with Iran. Meng has denied the allegation. U.S. authorities have raised concerns that Beijing could use Huawei's telecommunications equipment to spy. The company has denied that claim. China experts expect more probes and possible indictments in what could be a prolonged battle as U.S. security and defense officials make the case that China poses the greatest threat to the country in coming years. For investors, an easing of U.S.-China trade tensions could give the market a lift in the near term. Ultimately, though, it will have to grapple with the longer-term consequences of what could be a prolonged period of U.S.-China tensions as China tries to become dominant in key emerging technologies such as artificial intelligence. HSBC global equity strategist Ben Laidler wrote in a note this week that a resolution to trade tensions could add about 4% to the MSCI All Country World Index, considering the two countries account for almost a quarter of global trade. Laidler said the 40 most tariff-sensitive U.S. and Chinese stocks, identified via an HSBC screen, had underperformed significantly. (For those keeping track, he said they trade at a discount to their historical valuations equivalent to 2.5 standard deviations.) HSBC thinks companies are in a good position to pass on much of the costs if tariffs increase, adding that analysis of U.S. earnings calls suggests that about 30% of executives who mentioned tariffs think their company can offset the hit. But if the two countries make peace, even temporarily, that could be good for those companies with the highest sensitivity to trade issues. Technology stocks dominate HSBC's list of companies with the highest sensitivity. Those with more than a third of sales coming from China include semiconductor firms like Skyworks Solutions(SWKS) , Qualcomm(QCOM) , Broadcom(AVGO) , and Micron Technology(MU) . The casino operator Wynn Resorts(WYNN) and AO Smith (AOS), which makes water heaters, are on the list as well. In China, the companies with the highest revenue from the U.S. include power tool maker Techtronic Industries(TTNDF) (669. HongKong), electronic components maker AAC Technology Holdings (2018. HongKong), meat processor WH Group (228. HongKong), and cordless phone and electronic toy maker VTech Holdings(VTKLF) . Quants see a different set of winners and losers. Yin Luo, head of quantitative research, economics and portfolio strategy for Wolfe Research, identified the Russell 3000 stocks with the biggest sensitivity to whether the two countries reach a deal before March 1. The U.S. has said it would increase tariffs on $200 billion of Chinese goods to 25% from 10% if an agreement isn't reached by then. Healthcare companies topped the list of companies that should benefit if frictions ease, including oncology-focused biotech Tesaro(TSRO) , Momenta Pharmaceuticals(MNTA) , and Arrowhead Pharmaceuticals(ARWR) , Luo said in a separate note. Stocks that could take a hit if a trade deal isn't signed include retailers such as Big Lots(BIG) and Children's Place(PLCE) , biotechs like Wave Life Sciences(WVE) and Acceleron Pharma(XLRN) , as well as energy company FTS International(FTSI) . Thursday morning, the iShares MSCI China ETF (MCHI) was down slightly at $55.93, but remained 5.6% higher year to date. Write to Reshma Kapadia at reshma.kapadia@barrons.com