Goldman sees buying opportunity in US$60 billion in bonds of China firms on US list

Historically, Goldman analysts Kenneth Ho and Sandra Yeung wrote, inclusion on the military links list has only had a short-term impact on bond prices.

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In January 2021, then-US president Donald Trump issued an executive order that put 35 Chinese companies with links to the army under sanctions, including chipmaker Semiconductor Manufacturing International Corp, Huawei Technologies and surveillance camera maker Hangzhou Hikvision Digital Technology. The executive order prevented US investment in these companies.

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Bonds of the affected companies sold off in the fourth quarter of 2020, culminating in a widening yield spread against the Asia US dollar bond index by around 60 basis points, Goldman said. The sell-off continued until the middle of 2021, when the yield gap disappeared and the affected bonds began to move in tandem with other investment-grade Chinese debt instruments, it said.

“The impact from the US executive order in 2021 was relatively short-lived and we expect any negative impact from recent developments to be temporary,” Goldman said.