Winners and losers in the trade war are showing up. Not just in the news but on stock screeners as well. When a simple screener picks up bedfellows in two different markets, we might be looking at a movement that has legs to go higher.
We show you two stocks (one is Singapore stock, another Hong Kong stock) that show huge rally in the protein segment. Perhaps it has to do with trade war that’s happening now.
Asian protein stocks rally
News channel RT made this report today “Trade war chickens home to roost: Billions of pounds of meat fill US warehouses with nowhere to go“.
More than 2.5 billion pounds of meat and poultry produced by US farmers have been stockpiled in cold-storage warehouses with the amount expected to grow further, according to the latest federal data.
Record production of beef, pork, poultry and turkey has become increasingly dependent on exports as US consumers cannot buy up the huge amount of meat. That would drive down prices for American consumers, restaurants and retailers. However, the recent import tariffs imposed by the country’s trade partners on the wide range of US goods, including agricultural produce, have slowed down sales of US meat and poultry abroad.
Earlier this year, China and Mexico, the largest foreign buyers of US meat, taxed American pork products in response to the tariffs imposed by the White House on steel, aluminum and some other goods. The measure made prices for US hams, chops and livers in those markets shoot upwards, reports Wall Street Journal.
“We’ve got too much capacity built in this industry if we’re not going to be exporting more product,” Ken Maschhoff, the chairman of Illinois-based hog-farming company Maschhoffs, told the media.
Not coincidentally, our simple stock screener that looks for stocks on the move in Singapore and in Hong Kong picks these two bedfellows: Japfa (UD2.si) and Leyou (1089.hk).
Japfa is a commodity company listed on the SGX that operates in China and large part of South Asia. Its business? Dairy product, animal protein and consumer goods. Japfa is now at 52-week high after bottoming just 3 months ago.
Leyou is a company listed on the HKEX that supplies poultry although it has a digital gaming subsidiary. Leyou is now at all-time high with multiple continuation patterns prominently printed.
The performance by both stocks are extraordinary when broad market sentiment is at a low.
Interestingly, an overlay reveals that their bottom and subsequent rally might have the same driver since both operate in overlapping business segments. My guess is that bottom coincides with Trump’s declaration of war on China and rest of the world. Business insiders quickly moved in on stocks in affected segments. Which may be correct in this case, anticipation that Asian suppliers will take over the space occupied by US companies.
What to do?
- We believe that markets move in zigzag. Instead of rushing to commit at high, we prefer to look for entry at the next round of retracement. It might be just speculation now but any report coming out from Japfa and Leyou will be able to confirm if there is an actual boost in business.
- We are going to place these 2 stocks like these on our watch list and we might report them from time to time as well as others in the same segment if we uncovered more.
- Additionally this trade war hits a large spectrum of goods so protein is not the only segment. We should look out for others both in the news as well as stock screener. If members know of any, please share with us so we can make a post/report.