Finishing pigs

One of the most prominent corporate victims of the U.S.-China trade dispute appears to be turning a bit more resilient to news about tariffs between the world’s two largest economies.

WH Group Ltd. rose as much as 5.6 percent in Hong Kong on Wednesday before paring that gain in the afternoon, seemingly shrugging off news of potentially higher U.S. levies on imports from China. The world’s largest pork company, which generates nearly 60 percent of its revenue and profits in the U.S., has slumped 33 percent from its February high amid the trade tensions.

"The market is ignoring the news of potential 25 percent tariff, as previous headlines on trade war haven’t always been consistent with results," says Frances Cheung, head of Asia macro strategy at Westpac Banking Corp. in Singapore.

The Chinese owner of brands including U.S.-based pork giant Smithfield Foods is the third-worst performer on Hong Kong’s Hang Seng Index this year and has become exceptionally susceptible to shifts in trade tensions.

The stock slumped 12.5 percent in the four trading days from March 22 when President Donald Trump was said to plan to impose $50 billion of tariffs against China. Investors then rejoiced at news on May 17 that Trump intended to meet with China’s top economic envoy to resume trade talks, by driving up WH’s shares by 7.6 percent over the next two days. But, investors ducked for cover from June 5, selling the stock down by 15.4 percent during the next eight days, ahead of a June 15th deadline for the U.S. to reveal a list of goods subject to levies, as meat products were unlikely to be spared.

The selloff in WH Group’s shares escalated a downgrade by Credit Suisse Group AG in mid-June, with the brokerage cutting the rating to neutral from outperform, citing increased tension in international pork trade and low price of the commodity. WH’s next half-year results will be a "major disappointment" for investors as the expected recovery in the U.S. market is unlikely, according to its report.

"Shares have been weak since the beginning of the trade war so it’s no surprise to see some rebound," Daniel So, a Hong Kong-based strategist at CMB International Securities Ltd., said, referring to Wednesday’s gains. The real impact from the trade war is "still yet to be seen. I don’t think the shares will resume an uptrend."

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