While the US stock market is expected to outperform in the near term, investors have to figure out the mindset of President-elect Donald Trump in order to identify the best sectors to bet on.
Given that the Trump administration is likely to adopt a militaristic policy to safeguard US hegemony, that could set off a new round of arms race across the globe.
The NYSE Arca Defense Index (DFI) , which represents a group of companies involved in supplying military systems, equipment and services to the US and its allies has surged 16 percent since Trump’s victory, outperforming the benchmark.
Both China and Russia would face pressure to ramp up investment in national defense. Stocks related to the defense concept look interesting.
Nevertheless, the choice is limited and the quality varies.
AviChina Industry & Technology Co. (02357.HK), CSSC Offshore and Marine Engineering Group Co. (00317.HK), China Shipbuilding Industry Co. (601989.CN) and China CSSC Holdings Ltd. (600150.CN) are some of the stocks investors can investigate for trading opportunities.
With Trump planning to spend heavily on infrastructure, the US market has been chasing commodity and resources stocks.
Similar plays in Hong Kong and China may also be worth considering.
Oil stocks may do well after the OPEC-Russia deal to cut output.
But the broad market may remain under pressure, with the Hang Seng Index expected to trade between 22,000 and 23,600 points in the next few months.
Overbought technology plays such as Tencent (00700.HK) is expected to weaken further and Hong Kong Exchanges and Clearing Ltd. (00388.HK) may also retreat after a lukewarm start to the stock link with Shenzhen.
This article appeared in the Hong Kong Economic Journal on Dec. 13
Translation by Alan Lee
[Chinese version 中文版]
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