Alex
·shared a link post in group #The Most Important Thing
Idea brainstorm: how to play the escalating US China tech war
The Biden Administration on Friday took the most aggressive step yet to restrict American companies from selling semiconductors to Chinese firms.
China’s leadership is focused on their once every 5 year party congress right now. Given the magnitude of Biden’s escalation, China’s leadership may feel the need to respond with more than words.
What are some potential trades to play this development? I’ll pose two ideas:
1) Long MP (North America’s leading rare earth processor) - given Biden’s approach to hobble China’s advanced tech by blocking access to semiconductors, China could respond by restricting sales of processed rare earth metals to US firms. China controls >90% of global processing supply. This would likely lead to great exposure for MP as the only North American alternative to Chinese supply
2) Pair trade - long Korean semis, short American semis: no matter how you slice it this policy is at worst neutral for Korean semis and possible very positive. Korea has not yet agreed to follow the US’s restrictions, which could lead to huge market share gains from Chinese purchasers. Korea is a strong ally of the US and reliant on US military support, so they could be forced to follow suite with restrictions - my guess is this outcome would be a wash on the pair trade
https://www.bis.doc.gov/i..
