LIVE MARKETS-Capital Goods: investors on alert over Chinese competition

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CAPITAL GOODS: INVESTORS ON ALERT OVER CHINESE COMPETITION

JPMorgan has sounded the alarm over the growing threat of Chinese competition to the European Capital Goods sector, identifying several stocks that look particularly vulnerable.

"Whilst the spectre of Chinese competition is not new, recent geopolitical developments, a slowdown in domestic China activity and examples of greater outreach from Chinese players, for example in EV, have moved the discussion up the agenda".

China represents a low double-digit percentage of sales in the sector, but the U.S. bank sees a further, "hard to quantify but meaningful" indirect exposure from sales in Europe that are ultimately driven by China.

It sees three key factors behind the increased threat of Chinese competition: local players looking to new markets amid weaker domestic demand; Chinese companies improving their production and technology; and China's ambition to establish leading positions in specific global markets.

While many products and markets have entry barriers that can prevent Chinese competition, vulnerabilities exist, and investors need to be aware of the risks, JPMorgan says.

They point to Electrolux ELUXb.ST, Kone KNEBV.HE, Landis+Gyr LANDI.S, Schindler SCHP.S, Siemens SIEGn.DE and Vestas VWS.CO as having a higher risk profile.

(Danilo Masoni)

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