Is it still possible for Australian investors to profit from China? New Zealand might be the answer
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It’s been a rough couple of years for Australian investors seeking to profit from China but New Zealand might just be where to look for opportunities.
Over the 2010s as tourism and immigration from China increased, several industries profited off the back of demand from China’s rapidly growing middle class.
Examples include infant formula companies, wine exporters and “daigou stores” – stores that would operate for Chinese tour groups who would buy goods for themselves as well as family back home.
The closure of Australia’s borders and geopolitical tensions leading to the imposition of tariffs has sapped a significant amount of that demand.
But perhaps the door to China isn’t completely closed to Australian investors.
Earlier today, AuMake (ASX:AUK) rose 15% after announcing new strategic growth initiatives in New Zealand to help it access China.
AuMake’s traditional business model has been daigou stores but it has pivoted to an online model amidst border closures on both sides of the Tasman.
While relations between Australia and China have gotten worse in 2021, it hasn’t been as bad in New Zealand – at least, if the implementation of an upgraded Free Trade Agreement (FTA) is any guide.
The FTA came into effect in January 2021 and by June, New Zealand exports had grown 17% from 12 months ago to NZ$6 billion.
32% of this went to China, more than anyone else and this figure is higher in other industries – for example, 44% of dairy exports go to China.
AuMake already generated 25% of its revenue from New Zealand, primarily through physical stores prior to COVID, but online since COVID.
Yesterday it executed a brand development partnership with Prizm Group whereby Prizm would provide access to a pool of over 100 Kiwi brands to enhance AuMake’s product offering to its online marketplace platform. AuMake also announced it would use the distribution centre of Wiseway (ASX:WWG) for export purposes.
AuMake chairman Keon Chan told Stockhead this deal would improve on that 25% revenue figure.
Furthermore, with many other companies having given up on China, it would have a greater opportunity when international students returned to New Zealand as well as to Australia.
“We think there’s great interest – talking to people in the market in New Zealand, they’ve experienced a huge pick-up in their products going to China,” Chan said.
“A lot of our competitors have moved on and left the sector so we are in a good position given that we’re one of the few left.
“I think now that we’ve transitioned our business online I think we’re much more agile, versatile and efficient business than we were prior to COVID.”
There are a handful of other New Zealand companies on the ASX offering investors access to China.
However one of the few food stocks is New Zealand Coastal Seafoods (ASX:NZS) which exports ling maw, a delicacy in many of its export markets.
Although New Zealand won’t reopen to tourism until the other side of Christmas, there are a handful of other companies that could benefit when tourists return.