After a sweeping look at global trade shifts, JPMorgan strategists have concluded that some of Apple’s Chinese suppliers could benefit from the trend of supply chain diversification. The Oct. 18 report looked at 10 aspects of “the great supply chain relocation and the rise of trading blocs.” The analysis ranged from China’s dominance in the global supply chain and overcapacity concerns, to U.S. policy. U.S.-China tensions and talk of “decoupling” emerged during Donald Trump’s first term as president. Calls for supply chain diversification picked up during the Covid-19 pandemic. Republican nominee Trump has threatened 60% tariffs on China if he is reelected as president next month. Democratic nominee Kamala Harris is expected to maintain the Biden administration’s tough stance on Chinese tech, and calls for high-end manufacturing to return to the U.S. “Tariff war 2.0 would also likely accelerate the pace of global supply chain relocation,” the JPMorgan analysts said. “Our EM equity strategy team highlights some of the MSCI EM companies (from India, ASEAN and Mexico), which could be potential beneficiaries of supply chain relocation and growth of the manufacturing sector in the respective markets,” the report said. “Further, they highlight names that could benefit from Apple’s supply chain relocation,” the report said. Apple plans to increase production of iPhones in India , while some of its China suppliers have invested in factories overseas. The analysts’ list of supply chain diversification beneficiaries included three names traded in mainland China: Wingtech Technology, Luxshare Precision Industry and GoerTek. JPMorgan rates Wingtech and Luxshare overweight, while its neutral on GoerTek. The three companies already manufacture in many parts of the world outside of China, according to their websites. Apple’s latest supplier list show the company is buying from GoerTek and Luxshare in Vietnam as well as China. A supplier list from a prior year showed Apple bought from Wingtech’s factories in Malaysia and the Philippines. The latest version only listed Wingtech’s China operations. Other Chinese suppliers have expanded business abroad along with their customers. Shenzhen-based smartphone company Oppo said when it opened its factory in Indonesia, it helped around 10 of its suppliers move there as well. Chinese companies’ overseas revenue has grown over the last few years, and a portfolio of companies with high overseas sales exposure has generated 9.5% annualized alpha from 2019 to 2023, Bernstein analysts said in their report this month on China’s global manufacturing development. “This, we believe, is going to be a key source of return for investors going forward as Chinese companies go global and leverage their low-cost, high-quality product strategy outside China,” the analysts said. Apple supplier Luxshare is also one of their top picks. Bernstein rates the stock outperform with a price target of 50 yuan ($7.02), 15% above where shares closed Friday. Luxshare “has a sizable site in Vietnam involved in the assembly of Apple wearables and non-Apple business. The overseas capacity represents ~25% of Luxshare’s overall capacity,” the Bernstein analysts said. For Apple’s iPhone, however, the Bernstein analysts are less optimistic that India can become a viable alternative to China. They expect Luxshare to gain share in the smartphone’s assembly in China. Apple is scheduled to release quarterly results on Oct. 31. — CNBC’s Michael Bloom contributed to this report.
Check out the companies making headlines in midday trading: American Airlines — Shares slipped less than 1%, recovering from earlier losses, after the airline temporarily grounded all of its flights due to a technical issue. Broadcom — The semi stock added 2%, extending its December rally. Shares have surged more than 46% this month, propelling its 2024 gain above 112%. Big banks — Shares of some big bank stocks rose more than 1% amid news that a group of banks and business groups are suing the Federal Reserve over the annual stress tests, saying it “produces vacillating and unexplained requirements and restrictions on bank capital.” Citigroup , JPMorgan and Goldman Sachs shares gained more than 1% each. Arcadium Lithium — Shares rose more than 4% after the company announced its shareholders have approved the $6.7 billion sale to Rio Tinto . The deal is expected to close in mid-2025. International Seaways — The energy transportation provider surged 8% after an announcement that the company would be added to the S & P SmallCap 600 index, effective Dec. 30. The company will replace Consolidated Communications , which is soon to be acquired. Crypto stocks — Shares of stocks tied to the price of bitcoin rose as the cryptocurrency gave back recent losses amid a climb in tech names broadly. Crypto services provider Coinbase gained almost 3% and bitcoin proxy MicroStrategy gained more than 5%. Miners Riot Platforms and IREN gained 6% and 4%, respectively. U.S. Steel — The steel producer’s stock hovered near the flatline amid news that President Joe Biden will decide on the fate of its proposed acquisition by Japan’s Nippon Steel after a government panel failed to reach a decision . Apple — Apple shares gained 0.9% to notch a new all-time high. The stock has rallied nearly 34% year to date. — CNBC’s Sean Conlon, Lisa Han, Tanaya Macheel and Alex Harring contributed reporting.
A general view of the Federal Reserve Building in Washington, United States.
Samuel Corum | Anadolu Agency | Getty Images
The biggest banks are planning to sue the Federal Reserve over the annual bank stress tests, according to a person familiar with the matter. A lawsuit is expected this week and could come as soon as Tuesday morning, the person said.
The Fed’s stress test is an annual ritual that forces banks to maintain adequate cushions for bad loans and dictates the size of share repurchases and dividends.
After the market close on Monday, the Federal Reserve announced in a statement that it is looking to make changes to the bank stress tests and will be seeking public comment on what it calls “significant changes to improve the transparency of its bank stress tests and to reduce the volatility of resulting capital buffer requirements.”
The Fed said it made the determination to change the tests because of “the evolving legal landscape,” pointing to changes in administrative laws in recent years. It didn’t outline any specific changes to the framework of the annual stress tests.
While the big banks will likely view the changes as a win, it may be too little too late.
Also, the changes may not go far enough to satisfy the banks’ concerns about onerous capital requirements. “These proposed changes are not designed to materially affect overall capital requirements, according to the Fed.
The CEO of BPI (Bank Policy Institute), Greg Baer, which represents big banks like JPMorgan, Citigroup and Goldman Sachs, welcomed the Fed announcement, saying in a statement “The Board’s announcement today is a first step towards transparency and accountability.”
However, Baer also hinted at further action: “We are reviewing it closely and considering additional options to ensure timely reforms that are both good law and good policy.”
Groups like the BPI and the American Bankers Association have raised concerns about the stress test process in the past, claiming that it is opaque, and has resulted in higher capital rules that hurt bank lending and economic growth.
In July, the groups accused the Fed of being in violation of the Administrative Procedure Act, because it didn’t seek public comment on its stress scenarios and kept supervisory models secret.