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These stocks are the China trade talks ‘tells’ — they’ll move on deal progress or a breakdown

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Via CNBC

President Donald Trump meets with China’s President Xi Jinping at the start of their bilateral meeting at the G20 leaders summit in Osaka, Japan, June 29, 2019.

Kevin Lemarque | Reuters

A slimmed-down trade deal, stalled talks and a “fluid” situation are just some of the conflicting reports that have surfaced this week as the U.S.-China trade talks officially kicked off Thursday. For investors reading the tea leaves of every trade headline, things can get confusing.

But there are certain stocks investors should focus on over the next two days for the true “tell” on whether talks are making any progress.

First there’s CNBC’s proprietary “China Trade Index” to track companies with the biggest China revenue exposure and the most imports from China.

The index includes typical trade bellwethers Apple, Nike and Caterpillar and also contains many retail names such as Best Buy, Kohl’s, Honeywell.

The gauge is having a wild week as companies move in tandem along with trade headlines. Most recently, it jumped 2% after President Donald Trump said he’s meeting with Chinese Vice Premier Liu He on Friday, renewing hopes for a trade resolution. Member stocks including Kohl’s, Emerson Electric and Caterpillar popped 2% on Thursday after Trump’s comment.

Earlier in the week on Tuesday, the index plunged as tensions heightened after the U.S. blacklisted 28 Chinese entities over alleged human rights violations against Muslim minorities in Xinjiang, while putting visa restrictions on Chinese officials involved. China responded with “stay tuned” for possible retaliation against the blacklist.

All eyes are on Thursday’s high-stakes negotiations as the U.S. and China go head to head on trade. Stocks already had a wild ride Wednesday night after a slew of contrasting reports sparked volatile overnight trading.

Stocks with highest China revenue

Goldman Sachs screened Russell 1000 Index member companies for those with high revenue exposure to greater China, using 2018 company filings. These stocks will be very sensitive to any signs the trade talks this week are going well or poorly.

The list is concentrated in chipmakers Qorvo, Qualcomm, Micron Technology, Nvidia, Broadcom and Intel. Semiconductors are already under pressure after the Trump administration blacklisted Chinese telecom giant Huawei, a big customer of U.S.-made chips.

The Yum spin-off Yum China gets 100% of its sales from China, and its stock has tanked 8.4% in the last three months. Casino operators Wynn Resorts and Las Vegas Sands are heavily relying on their revenue in China, which have seen their stocks fall 26% and 17.7%, respectively.

WATCH: Mnuchin departs China trade talks


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