There are signs that Beijing may be softening its zero Covid policy stance. It’s very early days yet though, so take any hint that the Middle Kingdom is working to strike a balance between containing the pandemic and focusing on recovering its economy with a hefty grain of salt.

What cannot be argued, however, is that China will have to get up and running eventually. So it’s just a matter of how far you want to push your market spidey senses on when’s a good time to buy low on China exposed stocks.

VP Capital co-founder and portfolio manager John So says don’t hang around too much longer.

“Obviously by the time it has happened the stocks have already predominantly reacted so you can’t really wait until it is fully open to get in because most of the gains will be had between now and the actual easing of restrictions,” he said.

So’s focusing on resources, tourism and students. Here are three ways he’s covering a China reopening.

Education – IDP Education (ASX:IEL): Before the pandemic in 2019, China accounted for 28% of overseas students in Australia.

IDP paves the way for international students to gain placements in English speaking countries, offering application processing, pre-departure advice, and help with entrance exams and International English Language Testing System tests.

It’s not cheap at $28.57 but this time last year, just as China was heading into extreme lockdown, it nearly hit $40.

It’s already benefited from India reopening, and parts of South America and Europe where the English language tests are crucial.

“But … with China having its zero policy for more than a year, what IEL is missing in terms of the piece of the puzzle is those students coming back,” Soe says.

Event Hospitality and Entertainment (ASX:EVT): International travel is – finally – showing some green shoots, and it’s not all about Qantas. With travel comes accommodation and experiences, and EVT has some big names in its stable – well-known brands like Rydges and QT, Event Cinemas and Thredbo Resort.

“You’re picking up exposure to inbound tourism, student numbers, working holiday visa people, and migrants,” So says.

Sandfire Resources (ASX:SFR): Iron ore’s not doing so great, with construction weak in China, and an oversupply of apartments to deal with as well.

But it looks like copper’s time may have finally arrived. It’s an essential thematic throughout the rise of EVs and transition to clean energy.

At cashflow break-even and with a new mine in Spain, So reckons buying Sandfire now means “you’re getting a free option on a copper price recovery which I think is going to happen sooner rather than later with the Chinese economy coming back”.

Guy Le Page

RM Corporate Finance

Gold is back? Maybe – there’s certainly some big buyers out there, including central banks from Turkey, Uzbekistan, Qatar, and India. In fact, as Le Page notes, in the year to September 2022, banks have snapped up 672 tonnes of gold. That’s the biggest year in central bank activity since 1967.

Perth stockbroker Argonaut Securities is in. It’s seeking $50 million as a “unique counter cyclical opportunity’ for a fund weighted 50% towards Australian gold stocks.

Southern Cross Gold (ASX:SXG) is a potentially chunky one that caught Le Page’s eye back in May 2022 with solid hits at its 100% owned Sunday Creek project in Victoria. Eight months’ exploration later, Le Page is still seeing intercepts returning “Fosterville-like grades”.

That’s Fosterville, Victoria. As in one of the highest-grade gold mines in the world.

When it drops, Le Page is hoping for a JORC Resource of +750,000 ounces at high grades. That could give a reasonable in-ground value of between $0.60 and $1.20 per SXG share. It’s currently trading at 60c.

Quick shots

We’re in the middle of COP27, the largest annual gathering of Heads of State, ministers, climate activists, mayors and CEOs all talking about climate action.

It’s in Egypt this year and if you’re looking for an Australian stock in the spotlight, ASX-listed company Papyrus Australia (ASX:PPY) is on the guest list.

Founded by Ramy Azer and operating in Egypt, Papyrus converts banana plantation waste into liquid organic fertiliser, banana fibre pulp and food packaging products.

The company has recently penned a contract to sell its banana fibre moulding line equipment and a moulded banana fibre product to the Egyptian government.

Carl Capolingua

ThinkMarkets

Carl’s gone all macro on us here at Stockhead with his weekly gaze into what the charts are telling him.

It’s pretty grim all round out there, but Capo’s candles say Lithium Carbonate 99% Min China Spot is looking solid at 577,500 CNY. He’ll stay bullish on that until a close below 427,500 CNY.

And back home, there’s good fundamentals in the S&P ASX200 Energy Sector Index (XEJ). It’s currently sitting at $11,455 and worth staying Bullish on until a close below 9,510.

On the other side of the ledger, the trend is definitely not friendly for the Nasdaq Composite (COMP), Iron ore 62%, and S&P ASX200 Consumer Staples Sector Index (XSJ). Carl’s Bearish on all of those – and the upside is looking too far away to bother trying to predict just yet.
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead.

Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.

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