To The Moon

This is the fourth follow up article of the 5-part series. 

Before I start, I thank all readers who have faithfully follow the series of articles. It makes up for the effort and time put in to share my thoughts.

With the three parts laying the groundwork, the readers must be curious what they could do to either protect themselves or take advantage of the evolving themes.

I have lay this out in a 2-part article so that they don't get too wordy and boring.

Actionable themes

Deglobalisation / Chip (Tech) Control

Chips manufacturing - SMIC is the most obvious beneficiary of both themes

SMIC is in no doubt way behind in terms of technology advancement compared to TSMC or UMC, Samsung or even Global foundaries. But, with the help of US government in imposing advanced technology export bans to Chinese based firms, local Chinese technology firms have no choice but to look internally. Whereas in a normal free trade world, the like of SMIC will not be able to compete against the semiconductor big-wigs and have to explore low margins to survive, the export bans inherently creates a vacuum of supplies. Demands are still the same, thus created an unprecedented explosion 💥 of chips supply demands for SMIC. 

SMIC, on one hand would be able to supply their lower technology chips at a much better margin, on the other hand would be able to focus on its R&D to move up the value chain with competition kept at bay by the US government. China government is not sitting idle as well. Technology development is in the forefront on the government's push. To tackle the ban, the Chinese government has thrown full support behind the likes of SMIC in its technology development. This will in no doubt create much needed tailwind for the future of SMIC.

The other key beneficiary of technology bans are likely the large semiconductor equipment firms like Kingsemi, Advanced Micro-Fabrication Equipment, but they are all listed only in Shenzhen stocks exchange and not covered much here. A point to note however is that their technology, like SMIC, is way behind those of the international competitors. Without the US technology curbs, they could only supply to the low end chip manufacturers.

Before the readers rush into the above mentioned companies, take note that Chinese investors/ speculators have already made their move since the above announcement. Many of those stocks prices are close to their one year high. I would not advocate taking positions in any of them right now. 

This is still early days and given the technology bans imposed on Chinese based companies, there is still plenty of catch-up time before any of these companies can reap the benefits of this US move. Instead I urge caution and put some of these companies into your watchlist and to only start nibbling when the speculators start moving out. The technology curb imposed by US will definitely take a hit on the initial profits of these affected companies. When reality stuck, speculators will start moving out. As this is a long term trend, long term investors will understand this hiccup is a necessary evil to reap the rewards.

Another effect of deglobalisation is obviously in the food / agriculture and resources industries as the result of protectionism. However, as they are another sectoral theme, it is too big to be addressed in this already lengthy 5-part series and won't be discussed here.

Thank you once again for reading. The last part of the series will be released soon.

@TigerStars  @MillionaireTiger  @TigerEvents  @CaptainTiger  

I hope @TigerStars  can consider this and the next article to help more readers to understand how to protect themselves and reap the benefits of the stated themes.