CITIC SEC: With the US election settled, what impact will it have on the technology sector of US stocks?

CITIC SEC released a research report stating that the outcome of the U.S. presidential election, with Republican policy proposals, is generally positive for U.S. tech stocks, especially for financial technology and American tech giants. However, it may also increase short-term uncertainty for the semiconductor and hardware sectors. In the short term, the outcome of the election will help eliminate market uncertainty, and U.S. tech stocks are expected to continue their upward trend. However, Trump's unique style of governance may also increase market uncertainty. Fundamentals remain the core determining factor for the long-term trend of the tech sector, with the election being more of a short-term disturbance. Based on the assumption of an economic soft landing, U.S. tech stocks are still in a period of rising performance, and the future performance of the tech sector over the next 12 months is optimistic. Key points from CITIC SEC: Background: The outcome of the U.S. presidential election, with a Republican "sweep" According to market news, the outcome of the U.S. presidential election has resulted in the Republican candidate, Trump, being elected as President and the Republican Party having a majority in both the Senate and the House, achieving a so-called "sweep". After the Republicans come to power, their policy proposals are expected to have various impacts on U.S. tech stocks. Policy proposals: Significant differences between the two parties in trade, regulation, and taxation, with the Republican policies generally favoring U.S. tech stocks In terms of corporate taxation, the Republicans are in favor of extending the 2017 tax cut law, continuing tax cuts domestically, and compensating for the fiscal deficit through increased tariffs. The Democrats, on the other hand, advocate for overall tax increases, especially targeting businesses and wealthy individuals. As for trade and tariffs, the Republicans advocate for significantly increasing tariffs on imported products to protect domestic industries and balance trade relationships. They previously proposed imposing a 10% tariff on all imports and a 60% tariff on Chinese imports. The Democrats lean towards a more targeted tariff policy. In terms of industry regulation, the Republicans advocate for significantly easing government regulation to let the market function, while the Democrats advocate for maintaining necessary government regulation. Overall, the Republican policy proposals are generally favorable for U.S. tech stocks. Tariffs and trade: Mainly affecting the semiconductor and hardware equipment sectors, as well as companies with high overseas business proportion According to market news, Trump has proposed imposing a 10% to 20% tariff on almost all imported goods, as well as a 60% or higher tariff on goods from China, and increasing trade restrictions on some products. CITIC SEC believes that increased trade restrictions are unfavorable for companies in the U.S. semiconductor equipment sector and certain chip design companies, while higher tariffs could have negative effects on some globally operating tech companies. The Republican policies, centered on the U.S., are relatively favorable for wafer manufacturing companies. Tax policy: Lowering the corporate income tax rate, benefiting companies with a high proportion of U.S. income According to market news, Trump has expressed the desire to cut all tax rates, make the tax cuts from 2017 permanent, and further reduce corporate taxes. This means that companies with a high proportion of North American income will benefit relatively. Based on the annual reports of major U.S. companies in 2023, U.S. tech giants, software, and internet companies have a relatively high proportion of income from North America, and are expected to benefit, while companies with high overseas income proportions, such as in hardware and semiconductors, will benefit to a lesser extent compared to internet and software sectors. Industry regulation: Relaxed regulatory environment benefits tech giants, fintech, and M&A activities The Republican Party's 2024 campaign platform also states that they will resume the relaxed regulatory policies of the Trump administration. The following three types of companies are expected to continue to benefit: 1) Tech giants facing reduced antitrust pressure, 2) Relaxation of regulations in the financial sector, benefiting payment, credit, and related companies associated with digital currency; 3) Increased activity in M&A, benefiting tech giants and some mid-market companies with potential for acquisition. Other impacts: Strong U.S. dollar, upward pressure on interest rates, etc. Trump's future policy proposals may further increase U.S. inflation pressure, leading to a strong U.S. dollar, maintaining high policy interest rates, and other effects. A strong U.S. dollar is unfavorable for companies with high income proportions outside the U.S., while maintaining high interest rates may continue the market's preference for companies with strong balance sheets and a focus on revenue growth and profit margin balance. Risk factors: Macro data leading to continuous adjustments in the Federal Reserve's monetary policy; liquidity risk in the U.S. bond market; geopolitical conflicts leading to global economic weakness and restrictions on the free flow of technology; continuous tightening of policy regulation for tech giants; risks of slower than expected technological progress in the AI field; risks of policy regulations in the AI field exceeding expectations; risks of intensified market competition; risks of macroeconomic fluctuations leading to lower-than-expected IT spending by European and American companies, etc.