How will the trade war impact global growth?
President Donald Trump’s recent tweet about increasing China’s tariffs was echoed by another White House representative, which sent China’s (FXI) stock market tumbling. Citigroup economist Cesar Rojas has stated that increasing tariffs on $200 billion worth of goods would result in a 0.2 percentage point decline in global growth.
Trump had mentioned that the US government intends to increase tariffs from 10% to 25% on several Chinese imports. China’s growth might also fall by 0.5 percentage points in the next year or so due to these tariffs.
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Sina stock fell 8.5% this month
The ongoing trade war will most likely continue between the two countries at least in the near term. Several Chinese stocks including Sina (SINA) have been impacted this month after a stellar run in 2019.
Sina stock has declined 8.5% this week. Last year, trade war fears resulted in a 51% decline in Sina’s stock price. However, Sina stock has underperformed broader markets this year as it has gained just 7.4% since the start of 2019.
Is Sina undervalued after recent price decline?
Wall Street expects Sina’s sales to grow by 15.5% to $2.43 billion in 2019 and increase 17.1% to $2.85 billion in 2020. Sina’s earnings per share are estimated to rise by 9.8% in 2019 and 25.8% in 2020. Sina stock is currently trading at a forward PE multiple of 16.4x for 2019, and the stock looks undervalued considering its PE multiple.
However, it is likely that Sina’s share price will be impacted negatively as China might take a retaliatory stand now. If Sina continues to trade at a lower multiple at the end of 2019, it might be undervalued considering its robust earnings growth for 2020.
Shares of Sina stock have remained volatile for a number of years. In the last three years, Sina has generated returns at a compound annual growth rate of 8.9%, which stands at just 5.4% in the last five years.