'Bear in a China shop': the 3 most exposed sectors - Stifel
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"BEAR IN A CHINA SHOP" - THE 3 MOST EXPOSED SECTORS - STIFEL
Tech, auto part makers and luxury are the three most vulnerable sectors to fluctuations in the Chinese economy in the coming months, according to Lyonel Francoy, head of European equity research at Stifel.
Chinese macro data remains underwhelming, given the problems in the real estate market, Francoy wrote in a note.
Meanwhile, the upcoming U.S. election is a reason for concern among investors, especially given relatively stable U.S.-China relations over the past three years, he added.
Among chipmakers, the most exposed to China is ASML ASML.AS, with 49% of system sales coming from the region in the second quarter, Francoy noted.
The main concern among investors is after the November election, the U.S. government might restrict exports of goods produced overseas that use U.S. components or technology, Francoy said.Dutch tech group ASML produces key components in the U.S., for example.
The stock has lost about a third of its value since hitting a record highin July.
Francoy noted that risks to luxury stocks mainly come from very weak consumer sentiment in the region because of the weakness in the property market and the broader economy. He flagged an underlying deterioration in Chinese demand that could possibly lead to the second half of the year, as a whole, showing little change on the first half.
"As a result, consensus revisions are likely to remain negative," he added.
Francoy expects no stabilisation for car component makers either, a sector with some of the highest exposure to China across Stifel coverage, he said.
A gauge of top luxury stocks .STXLUXP has lost about 1% so far this year, while the automobile sector .SXAP has dropped about 10%.
(Linda Pasquini)
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