Could these ASX small caps make a motza out of the China-US trade beef?
Health & Biotech
Health & Biotech
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China is targeting more than 100 US products for tariffs in an escalating trade war with the Trump government.
Which ASX stocks could benefit?
Stockhead counted more than 20 small caps (see table below) that could be in the right place at the right time to reap an advantage from the China-US trade spat.
Monash University international trade law lecturer Dr Giovanni Di Lieto says the beef sector is one area where Australia could benefit from trade diversions.
“Australian beef producers will be much more competitive in exporting to China as their American competitors have to grapple with the 25 per cent tariff on their beef,” Dr Di Lieto wrote in The Conversation this week.
“On the other side, as China raises tariffs on soybeans, Australia could buy this product more cheaply from US farmers keen to find new distribution channels.”
Australia is reasonably safe from retaliatory action from the US, because of its negative trade balance — meaning it imports more from the US than it exports, Dr Li Lieto says.
|Code||Company||Month price change||Price March 12, 2018||Price April 9, 2018||Market Cap||Chinese exports?|
|ABT||ABUNDANT PRODUCE||0.1111111111||0.4||0.36||20.04M||In the works|
|AWY||AUSTRALIAN WHISKY HOLDINGS||-0.2||0.04||0.05||23.98M||Aspirational|
|BFC||BESTON GLOBAL FOOD CO||0.1578947368||0.22||0.19||82.01M||Yes|
|BAH||BOJUN AGRICULTURE HOLDINGS||0||0.3||0.3||36.45M||Yes|
|BEE||BROO||0||0.17||0.17||103.40M||In the works|
|BUG||BUDERIM GROUP||0.1935483871||0.37||0.31||26.24M||In the works|
|CSS||CLEAN SEAS SEAFOOD||0||0.06||0.06||96.70M||No|
|FOD||FOOD REVOLUTION GROUP||0||0.04||0.04||17.36M||Aspirational|
|GRB||GAGE ROADS BREWING CO||0||0.08||0.08||66.52M||No|
|HUO||HUON AQUACULTURE GROUP||-0.035||4.57||4.41||385.16M||Yes|
|MCA||MURRAY COD AUSTRALIA||0||0.06||0.06||20.81M||In the works|
|MRG||MURRAY RIVER ORGANICS GROUP||0.1764705882||0.4||0.34||47.20M||No|
|OGA||OCEAN GROWN ABALONE||0||0.17||0.17||29.60M||Aspirational|
The Chinese list of US goods it wants to tax also includes cotton, dried cranberries, wheat, and whisky.
Australian Whisky Holdings (ASX: AWY) and Murray River Group (ASX:MRG) have Chinese aspirations, while Namoi Cotton (ASX:NAM) supplies cotton mills there.
Dairy products have not yet been included in the tit-for-tat taxes and local formula exporters do not believe the trade spat will affect them much.
US dairy farmers have been losing market share for years in China anyway because of the higher tariffs on their products, according to the US Dairy Export Council (USDEC).
Where Australia companies can win, using Dr Di Leito’s logic, is picking up trade routes that could be strangled by US-China tariffs.
One example is China’s proposed 25 per cent tax on US soybeans, which it crushes to feed livestock, poultry and fish.
China is the largest buyer of soybeans in the world of which 40 per cent comes from the US, according to UN Comtrade.
Australian companies could be well-placed to supply gaps if Chinese fish, beef and pork farmers are forced to de-stock due to lack of feed. They could include Mareterram (ASX:MTM), Huon Aquaculture Group (ASX:HUO) and cattle exporter Wellard (ASX:WLD).
“Chinese consumers are now demanding more protein,” said Beston Foods (ASX:BFC) in its annual report last year.
“Chinese seafood consumption per capita for example, has tripled over recent years and now demands around 60 per cent of global aquaculture output. China has also become the worlds’ top meat eating nation.”