A brilliant Chess play

Two major trade deals with South Korea and Mexico/Canada in the past couple of weeks have been signed off! And more good news may be coming from the ongoing negotiations with Japan and EU in the near future. That’s something I have been expecting for months since the very first breakout of the potential trade war early this year! As I said, I never believe a real trade war would be materialized and all the major trading partners would find a way to compromise with the US for a new trade deal. Of course, you will quickly hear the naysayers to talk down the importance of such new deals as for them whatever Trump has achieved is either bad or nothing to the country. Just ignore such nonsense noises and see the big picture!  

Now the only major trading partner with the US that is still at a full stand-off is China. While I was indeed expecting a more speedy deal to come, it is becoming increasingly unlike that there will be a deal soon. The tactic for China is very clear now that they want to wait till the midterm election, hoping that Trump will be weakened after that to step back from his overwhelming pressure to push China for changes. I think China will likely be disappointed for that. For one, with the disgusting dirty play by the DEM’s side in trying to block the nomination of the Supreme Court Judge Kavanaugh, GOP may get more support believe or not in the mid-term election. The disgraceful saga engineered by the Left side will likely backfire for them that it will not only further strengthen the Right to vote but may very likely also motivate the undecided swing voters to go for GOP just as what they saw in 2006! But even if the result is not in favor of GOP, I think Trump has a much bigger strategy in mind in dealing with China and that’s why he said he has in no rush to talk to China for a deal. I start to see his brilliant idea unfolding. You see, all the major trading partners with China all feel the same regarding China’s unfair trading practices in terms of government-subsidized business and forced transfer of technology and IP. But all of them, including all the previous US presidents, can only get angry but dare not to speak out as China is too big to fight against. Until Trump! He is not a politician and is not controlled by any parties with vested interests. And he is the only US president who dares to challenge the status quo and so-called political correctness, including the trade conflicts he has initiated. I was also wondering why he would open all the fronts in fighting with all the major partners at the same time, not just China where he could gain more support from all sides. I suddenly realize now how smart and visionary Trump is. He is playing a gigantic Chess actually. His main target is still China and he wants to see some fundamental changes from China, a major legacy of his that may have long lasting historical impact not only for the US but also for the modern international trade! After disrupting and reestablishing the new trading order with all the major partners, he has managed to have them all reunited with the US with one unified and powerful voice, demanding China to change in the unfair trading practices. That’s his real ultimate goal and he is gaining more and more momentum toward this goal. I’m afraid China will have no choice but comprise in some significant way in the months ahead!

Actually the market has already told us loud and clear that China is fighting in a losing game as its stock market has lost over 20% in the past few months while the US market has reached new highs at the same time. But I think it will change as part of the Trump’s Chess play. China will be forced to give in one way or the other and the market will be relieved by avoiding a major trade war at the end! So as a contrarian, I see more opportunities from the sluggish Chinese and emerging markets. And one sector I particularly like is the emerging market e-commerce business. This is one of the megatrends for the future and more so for emerging markets. You see, they have the demographics advantage with much younger populations and their demands for Internet is still booming. The iPhone or smart phone penetration is still having a long way to go, meaning there is much bigger room to grow for their e-commerce. You can easily bet for this trend with one click for the EM e-commerce ETF, EMQQ. It holds top companies from China and other major EM countries that are doing similar e-businesses equivalent to Amazon, Google, FB, Twitter, Expedia or Uber. Just name a few: Alibaba, Baidu, Tencent, 58.com, Yandex, Naver, and MercadoLibre.  The trade war fear has knocked down EMQQ by about 20% for this year but I think this is great opportunity to grasp a few shares for the long-term. Believe me, if China finally “surrenders” to make a deal with US as I expect they will, you can quickly see a rebound in the EM markets, including EMQQ. Of course, as always, it is associated with risk sand trade with caution with the money you can lose.  

By the way, I may sound like against China. Not a bit actually! Just be a bit visionary and understand that for China to continue grow and progress healthily for long term, it has to change its trading practices in the international community to play by the rules. Otherwise, it will run into more and more serious confrontations sooner or later, which is fundamentally bad for China as a whole. Actually I got this kind of impression as well when I was in China lately that the Chinese business circle also wants to see this kind of changes that should be long term positive for China's future!  ✌✌