Even as China’s tech stocks begin to recoup some of their recent big losses, some investors and analysts are eyeing looming concerns that may have a worse impact than Donald Trump’s tariffs.

The Hang Seng Tech Index has shed more than $350 billion in market value since a March high, though it has gained more than 10% over the past four sessions. While China’s rapid AI development remains a key positive, heightened geopolitical tensions are at the forefront at the moment.

U.S. actions against China such as restrictions on financial holdings or further sanctions are a “serious risk,” according to Bush Chu, an investment manager at Aberdeen Investments. There has also been unverified chatter over potential forced delistings of Chinese stocks from U.S. exchanges, and some fear further restrictions on technology access.

Such measures could cause a “sharp selloff” of heavily foreign-owned China tech stocks, Chu said. “I think a lot of things are not yet priced in,” he said, also highlighting the broader impact on demand if tariffs weaken China’s overall economy.

China’s economy may suffer broadly from Trump’s aggressive hike in tariffs to 145% and the decoupling of the two nations. At the same time, the sector’s high index weightings and foreign ownership have broad ramifications for China’s markets.

With the U.S. raising tariffs applied to small parcels that were previously exempt from duties, Chinese e-commerce firms have been hit hardest. American depositary receipts of Temu owner PDD Holdings Inc. have slumped 25% since the start of April. ADRs of Alibaba Group Holding Ltd., the largest Chinese firm listed in the U.S., are down 21%.

The direct tariff impact is seen as small outside of online shopping, with the majority of China tech’s revenue and profits coming from domestic business. But non-tariff means may be deployed as well as tensions ramp up.

In February, the Trump administration released a policy memo that potentially calls into doubt the mechanism for Chinese listings in the U.S. That reminded investors of episodes in 2021 and 2022, when the specter of mass delistings from U.S. exchanges dragged on China’s markets.

“Given how high Trump already has pushed up tariffs against China, we believe delisting is moving up in the list of retaliatory options,” TD Cowen analyst Jaret Seiberg wrote in a note dated Wednesday. “That means risk is higher this week than last week for action.”

The U.S. Department of Defense has already blacklisted Tencent Holdings Ltd., China’s largest company by market cap, and others. While the Pentagon’s list carries no specific sanctions, it discourages U.S. companies and agencies from dealing with these Chinese firms.

The options market shows investors are nervous. The cost of hedging against declines in Chinese tech giants like Tencent and Alibaba remains near multi-year highs, after soaring the most among Hang Seng China Enterprises Index companies in the recent rout.

China’s tech stocks had been all the rage earlier this year as DeepSeek’s success drove investors into the nation’s listed AI plays. The worsening trade war has shifted attention back to U.S. efforts to limit Chinese access to the most cutting edge tech.

“While we are not sure whether the U.S. plans to announce any new restrictions on chip export, there have been concerns that tech companies that have cloud services and proprietary AI foundation models/capability could be under scrutiny and sanction,” Citigroup Inc. analysts including Alicia Yap wrote in a note. This could put pressure on Tencent, Alibaba and Baidu Inc., they added.

The sector still has valuation appeal, with the Hang Seng Tech Index trading at 15 times estimated forward earnings, below its three-year average level of 19 times and the Nasdaq 100 Index’s current level of 24 times.

The cohort’s heavy reliance on domestic demand also puts them in line to gain from Beijing’s efforts to support the economy.

“Chinese tech leaders are still relatively attractive,” said Aberdeen’s Chu. “Whether investors want to get into China stocks right now just to capture the AI opportunities … they may pause a bit for now given the great uncertainties, and they might re-enter if they obtain more clarity on the tariff, on the global economy.”

This story was originally featured on Fortune.com

Source link

Asahi has achieved what many international beer brands could only dream of—taking on much-loved local brands and winning.

A decade ago, when legendary Japanese brand Asahi was trying to work out how to break into the European beer market, it turned to a then-unfamiliar foe as a benchmark: the premium Italian brand Peroni Nastro Azzurro.

Soon, though, Peroni’s sales would become a much more vital benchmark for the beermaker, when Asahi snapped up the brand in 2016. 

Asahi Super Dry, the premium Japanese beer popping up in Asian restaurants and a growing number of pubs across Europe, has quietly made much bigger waves in the region thanks to its parent company’s slew of acquisitions in the last decade, cementing its position as a major hitter on the continent.

The brewer raked in $5.4 billion in revenue from Europe alone last year, a 13% jump from 2023, and $697 million in profit. Europe is now Asahi’s biggest market outside of Japan, making up 27% of its sales in 2024.

Japan’s population crisis

Asahi’s venture into the European market was no accident, and one CEO Atsushi Katsuki says had much to do with Japan’s ever-challenging aging population.

Japan’s working-age population has faced a relentless decline for the past 30 years, with the number of 15-64-year-olds falling from a peak of 87.1 million people in 1994 to 72.8 million in 2023. That decline in working-age people has become an existential crisis for Japanese companies including Asahi.

“If you look at the Japanese beer market, ever since 1995, the market has been contracting at a rate of 1-2% per year, and we think this is likely to continue,” Katsuki told Fortune on a visit to London.

In many ways, Japan serves as a harbinger for the Western world, which is facing its own demographic crisis with falling birth rates decades after it started to impact Japan. In the meantime, however, Asahi is making hay while the sun shines on Europe’s beer market.

For a domestically successful but niche Japanese brewer like Asahi, the challenge of breaking into Europe’s lucrative, yet brand-loyal beer sector was considerable.

Japanese brewers have created popular innovations domestically to get locals swarming to its beers. Asahi’s domestic competitor Kirin Ichiban introduced frozen beer to Japanese drinkers, which gives their beers a frosted top and helps maintain sub-zero temperatures while customers drink. Asahi has experimented with its own sub-zero beers in the country.

“I don’t think it works if you have a unified global marketing strategy,” said Katsuki as he explained why these innovations haven’t made it to Europe.

Rather than winning over Europeans with Japanese innovations, Asahi took a different approach, namely, if you can’t beat ‘em, join ‘em.

Asahi bought Peroni and Dutch lager Grolsch from AB InBev in a multi-billion dollar deal in 2016. The group then bought beer assets from the British brewer Fuller, Smith & Turner for £250 million (then $326 million) in 2019.

There has been a strong shift towards “premiumization” in the alcoholic drinks market in recent years, and beer is no different. Buying Peroni seemed like a natural next step in that premium evolution. 

Indeed, as part of a strategy to grow its global sales of Asahi Super Dry, Asahi used Peroni’s sales in London as a benchmark before the group acquired the Italian beer brand.  

On the face of it, Asahi Super Dry and Peroni Nastro Azzurro appear to be going for the same type of consumer, two premium lagers giving customers an international air when they drink.

“It is true that the value proposition of these are two brands are similar, in that they propose this idea that it is stylish, high-end, premium and refreshing.”

Katsuki said that leaning into Peroni’s “Italianess” and Asahi’s Japanese links have been winning strategies that speak to the feeling drinkers want to experience when they buy beer.

There have been other benefits to working in Europe, Katsuki says, including learnings about profitability growth management strategies and building a popular brand.

Asahi is now the number one beer supplier in Poland, the Czech Republic, Romania, and Hungary, while Katsuki says the group is “one of the largest players” in the U.K.’s super-premium category.

Europe’s temperance movement

One trend where Asahi expects Europeans to follow Japan is in a movement towards temperance.

Asahi is aiming for 20% of its global sales to come from alcohol-free and low-alcohol drinks by 2030, up from 12.1% now. In Japan, that figure is already about 15%. 

Sales of low-alcohol beer in the U.K. grew faster than any other market last year, buoyed in part by post-Brexit regulations that charges cheaper duties on low-alcohol beverages. But it reflects a wider movement toward sobriety across Europe. 

Katsuki says his company is seeing more diverse demand even in the low and non-alcohol sector of his business, with consumers demanding more variety and flavored beers to quench their thirst.

“We can see that the fact that a flavored non-alcohol beer is becoming really popular is suggesting the future growth of our beer adjacent category, because this gives the opportunity for those people who either choose not to drink beer or who cannot drink beer to still enjoy the drinking culture.”

European challenges

Challenges persist for the Japanese brewer in its quest to compete with native European rivals like AB InBev and Carlsberg.

Last year, Katsuki highlighted a shortage of barley and hops as a serious risk to beer supply across Europe. While Russia’s invasion of major grain supplier Ukraine had an impact on supplies, the more existential risk comes from climate change.

The group is working with Microsoft to improve crop detection while also diversifying its production, but climate change remains a relentless risk for Europe’s beer supplies.

Another quirky challenge that appears to have become an increasingly European affair is that of faux continental lager.

U.K. drinkers have been won over by Madrí, a Spanish-themed beer with tenuous links to the country and brewed entirely in the U.K.

The trend has caused the Spanish CEO of Estrella to call out Madri, accusing the beermaker of dishonesty while eating into his company’s market share.

Katsuki says he understands why there could be a frustration among producers and consumers to nationally ambiguous beers.

“In a way, they probably think producers are faking the origin of that beer,” Katsuki said.

“However, consider the climate crisis impact if you were to produce beer in Italy or Spain and ship it to the U.K., that is going to increase CO2 emissions.” He added that imported beers didn’t have returnable bottles, further reducing sustainability.”

There are more expansion plans to come from Asahi. Its famous whiskey brand Nikka has largely been confined to Japan owing to a long-running shortage of a vital liquid, meaning only 10% of its sales are outside Japan. 

Katsuki says Nikka regularly gets inquiries from customers in overseas markets, and Asahi is developing a plan to enhance production.

Either way, Europeans can expect to get used to a Japanese touch to their favorite drinks, even if they may not know it.

Editor’s note: A version of this article was first published on Fortune.com on October 1, 2024

This story was originally featured on Fortune.com

Source link

President Trump’s tariffs could inadvertently deliver  a “massive gift” to China by allowing it to catch up in the AI race and court new partners globally, Adam Thierer, a senior fellow at center-right think tank R Street Institute, tells Fortune. 

“It’s going to be very hard for the U.S. to win the so-called AI Cold War if America’s trade policies are simultaneously tanking global markets, discouraging technological investments, and potentially undermining traditional alliances with key allies,” says Thierer, who testified before House lawmakers earlier this week about the threat of Chinese AI models like DeepSeek to U.S. national security. 

Those policies, which are disrupting the global supply chain and creating major volatility in global markets, may have the unintended effect of driving U.S. allies into the arms of China for their technology needs. That gives China an unparalleled opportunity to gain more technological supremacy globally. “Suddenly, in the wake of this trade fiasco, we see EU officials saying, ‘Let’s get on the phone with China and talk,’” says Thierer. “Huawei has this telecommunications hardware system they want to sell, and there’s also these AI models that are free of charge.” 

But Chinese tech comes embedded with specific values, says Thierer. For example, “if you have Chinese-made hardware, you might be getting Chinese embedded surveillance and censorship along with it,” he said. “Or you at least have the potential for China to have greater leverage over those nations later, when they control these important technological systems.” 

It’s no surprise then that China is focused on “technological diffusion”—spreading technology across people, organizations, industries, and countries. In previous industrial revolutions, it was the U.K., and then the U.S., that developed more effective, low-cost products and services that ultimately became market leaders, then national and global leaders in their fields. Now, China wants to use its open-source AI models like DeepSeek in the same way.

That’s why technology executives need to get unified in their response, says Thierer, even though many tech billionaires, including Elon Musk, Mark Zuckerberg, Jeff Bezos, and Sam Altman, donated to Trump’s inauguration fund in the hopes of currying favor on tech policy. 

“If they’re all on their own, and they’re just trying to cut deals, they’re not going to get very far,” he says. “But a more concerted stand by a lot of the tech community to talk about how it undermines the broader interest of the technology community, and then the broader interest of the United States around global AI supremacy—that’s what’s important.” 

Thierer points to the post–World War II period, when the motion picture industry spread America’s culture and values globally. “A lot of conservatives don’t like to hear this,” he said, but Hollywood’s technology was “really important to broader strategic interests.”

With artificial intelligence, pulling back from the global marketplace allows China and the CCP to fill that void with their own technology, he said: “To me, that is extraordinarily dangerous for America.” 

This story was originally featured on Fortune.com

Source link