HK-listed steel stocks reel back despite trade war
Hong Kong-listed steel stocks have recouped the losses incurred since U.S. president Donald Trump signed off punitive tariffs on steel and aluminium products import to the United States as investors believed the impact of tariffs will be short-lived.
“A slump in the steel market will not stay for long, the trade war will only affect the stocks in a short-term,” said Sheung-Chi Yip, First Shanghai Financial Group Chief Strategist
An outbreak of trade war happened after Donald Trump announced his plan to impose 25% tariffs on aluminium and 10% on steel products import to the US. The move dragged steel stock prices down 10% on average in March.
Francis Sze-Chi Kwok, a Freeman Securities analyst, attributes the decrease of the steel stock prices to the trade war. But he said, “I don’t see an uncertainty of the trade war will lead to a disaster since the amount of China steel exports to the US is very small.”
Stocks of other industries using steel and aluminium as raw materials, such as automobile and Infrastructure, might see an increase in its cost in the short term but it may not affect the stock price. “Fluctuation of stock prices is prone to the demand in the market,” Yip said.
The US Department of Commerce released a report on imports of steel and aluminium in February said that the import of steel and aluminium products had adversely impacted the economic welfare of the US domestic industry and threatened to impair their national security.
Donald Tramp signed in early March a proclamation in Washington, to push forward the imposition of punitive tariffs on steel and aluminium products.
Kwok said the US imposed tariffs on steel and aluminium products would enhance protectionism while other countries may retaliate.
Anyang Steel Company Limited (0347) said in its 2017 annual results released in March that the rise of protectionism might have an adverse effect on the export of steel products.
Due to the U.S. tariffs, Hong Kong-listed steel stocks plunged more than 10% on average. Maashan Iron (0323), Anyang Steel (0347), Chongqing Iron (1053) and XiWang Steel (1266) all suffered stock losses.
XiWang Steel (1266) clarified in early March and said the company does not export steel products to the United States and the products manufactured by the company were primarily supplied to Shandong and other Chinese provinces.
Report on the Work of the Government 2018 published in March stated that China would cut its ineffective steel capacity for 30 million tons. The improvement in production efficiency would not leave a strong impact on the supply of steel industry and should not directly affect the stock prices of steel companies in Hong Kong, said Kwok. He said “It is a good news for long-term investors since a cut of excessive steel has an effect on stabilizing and consolidating the market.
However, Kwok also said the longer the trade war last, the more the uncertainty will affect the whole market. The US should seek a settlement with other countries in order to ease tensions.
《The Young Financial Post 新報人財經》
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