Tech stocks could rally on US-China tariff truce, impending tax cuts: Stanchart
[SINGAPORE] A pause in US-China tariffs could provide a boost to technology stocks, which earn significant revenue from exports, Standard Chartered bank has said.
In its wealth solutions weekly market views, the bank identified the US tech sector as a potential beneficiary of easing trade tensions, which could take the S&P500 index above February’s all-time high of 6,147.
“As trade war concerns subside, the US focus is shifting towards tax cuts. President (Donald) Trump wants to go beyond extending the 2017 tax cuts and enact corporate tax cuts to incentivise domestic investment,” it said.
“These policies should lend further tailwind to the ongoing equity rally.”
StanChart’s note comes as the US and China agreed to substantially reduce reciprocal import tariffs for 90 days.
Senior investment strategist Yap Fook Hien said: “The agreement reached by the US and China alleviates concerns about a severe US growth slump in the near-term.
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“The technology sector has supply chains across China and elsewhere – lower tariffs, or an outright exemption which has been in place so far, is great news for the sector.”
Yap believes the temporary tariff reversal can serve as a “clarity factor”, which could help firm up investment decisions and clear the path for the development of technology software products.
StanChart also remains bullish on China’s technology sector, and advocates continuing to add to the Hang Seng technology index on dips.
StanChart said it expects to see a near-term consolidation in the Hang Seng Index after the recent sharp rally.
It also likes the Hang Seng technology index, which is supported by strong AI-driven earnings, strong government policy support for the sector and attractive valuation.
In the first quarter of 2025, China’s technology sector’s earnings beat expectations, investment strategist Michelle Kam noted. The Chinese government has been running trade-in programmes that offer cash subsidies for consumers who replace old appliances, vehicles and electronics.
The government’s fiscal support for technological transformations are bolstering economic sales, Kam added.
“We expect growth sectors, such as IT, communication services and consumer discretionary, to benefit from such policies,” she said.
Dual-listed Chinese technology companies, as well as technology hardware and semiconductor companies, will benefit from the tariff cuts as bilateral trade resumes.
Meanwhile, the bank also sees the US pursuing trade deals with allies and shifting its focus towards tax cuts and deregulation.
The financial sector should also get a lift from a focus on easing regulations to boost lending.
The US is once again back on track to achieve a soft-landing, which benefits the financial sector, said Yap.
He added that the communication services sector, which rides on strong demand for online entertainment, has been fairly resilient to tariff concerns.