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Will the U.S. switch its focus to Taiwan and forget about Ukraine?

Goldman says HSCEI volatility is lower than that of the S&P 500!

Believe it or not, Goldman Sachs Group Inc. advised investors to sell call options on the S&P 500 and buy the same options on the Hang Seng China Enterprises index to catch up on oversold China-related assets.

Goldman prefers Chinese equities over US ones after the US stock ranked among the worst in the world this year. Recession fears, exacerbated by the Federal Reserve’s tightening policy, are at the heart of the massacre in global stock markets. Meanwhile, Chinese assets have also got pressure from COVID lockdowns, a real estate crisis, and renewed tensions between the US and China.

The HSCEI is down 31% this year compared to the S&P 500’s 23% drop. But Goldman argued last month that higher interest rates would weigh on the valuation of US stocks.

Goldman favors Chinese Class A stocks over offshore stocks since they have less exposure to global macroeconomic factors.

Biden focuses on China

Biden issued an executive order designed to cause significant economic damage to China.

The order aims to ban the use of chips made outside the US. That document concerns companies not only from the USA but from other entities using American technologies.

Biden’s decision could result in collapse. Americans working in China have little choice: quit their jobs in China or renounce their citizenship. The majority is likely to choose the former. Chinese high-tech companies might receive a personnel blow. As a result, production paralysis and supply stoppage might occur. All industries related to microelectronics can suffer. And last but not least, military production may suffer.

Let’s connect the dots

Xi Jinping made it clear that Taiwan will be a part of China. The events in Ukraine have shown the importance of UAVs. China even conducted exercises on the military use of UAVs. Remarkably they looked like an imitation of Taiwan’s takeover. The loss of Taiwan means the United States’ loss of decisive influence in the Pacific region. As you may guess, that is unacceptable for the US.

The States can’t pull the conflict on two fronts at once — Russia and China. Iran and Saudi Arabia are also getting on the US nerves.

It is time for the United States to pick just one target.

The States are likely to choose Taiwan since it is the more critical issue.

In what could the reduction of support for Ukraine result? Can the West cut a deal with Russia? We can expect negotiations in the spirit of “let’s come to an arrangement,” like those recently made by Elon Musk and Bill Ekman. But these attempts must follow on a more high level.

So, what comes next?

The phenomenon like this might have a hard impact on the markets. Which market is best to enter now if you’re a trader? There’s no correct answer. It is a matter of strategy, as well as a matter of trading skills.

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