In a surprise move which probably shouldn’t come as a surprise, Trump admin goes for the usual shock tactic ahead of key talks with China.
The Trump admin has added an additional 28 Chinese firms to its Entity List, which effectively restricts their ability to do business with the U.S. firms. Whilst the U.S. has denied that the move is related to trade talks, it’s hard to imagine the move is not designed to provide the U.S. with leverage, given trade talks are just 2 days away. But for what it’s worth, the official reason is for Beijing’s mistreatment of ethnic minorities and breach of human rights. Asked on whether a trade deal will be reached this week, a sceptical Trump said “Can something happen? I guess, maybe. Who knows. But I think it's probably unlikely…”
Hangzhou HikVision and Zhejiang Dahua Technology are notable additions to the blacklist; the former is the world’s largest supplier of video surveillance products; the latter (also in video surveillance) was alleged to have released a deceptive firmware update to ‘fix’ vulnerabilities of its hardware devices, following the largest DDoS attack in history. With trading in HikVision shares now on halt, their U.S. supplier Ambarella (NASDAQ:AMBA) slid over -12% in after hours trading as HikVision is rumoured to account for revenue to Ambarella in the ‘high teens’.
FedEx (NYSE:FDX) warrants another look following the recent developments. Back in July, Huawei accused FedEx of unauthorised re-routing of its packages which led to China investigating the US firm, just one day after announcing they will draft up an “unreliable entity list” of foreign companies. Whilst no company has been officially added to the list, one has to wonder if it is now just a matter of timing. And, technically speaking, now appears ideal with a potential swing trade setting up.