Improving China-Australia Relations... Emerging Australian Wine and Agriculture Stocks

As China seeks to restore relations with Australia, which it had previously cut ties with, there is an analysis that the stock prices of related Australian companies that will benefit from this could show an upward trend.

On the 10th (local time), Bloomberg reported, "The improvement in China-Australia relations brightens the outlook for Australian stocks facing trade restrictions," and predicted, "Wine manufacturers and some agricultural sectors will be the main beneficiaries."

China-Australia relations, which deteriorated sharply due to Australia's 2018 ban on Huawei and the 2020 investigation into the origin of COVID-19, began to see a reconciliation mood starting in May 2022 when Anthony Albanese was elected as Australia's Prime Minister. Chinese authorities recently decided to lift the maximum 218% tariff imposed on Australian wine after three years.

Reflecting expectations for the removal of punitive tariffs on Australian wine by China, the stock price of Australian wine producer Treasury Wine Estates rose about 15% in the first quarter of this year. Treasury Wine stated that it plans to reallocate wine shipments, which accounted for 30% of revenue before China's tariff imposition, back to China. According to Bloomberg's compiled data, the target stock price set by analysts for this company shows about an 8% additional upside from the current price. Similarly, there are forecasts that the stock price of Australian Vintage could also rise.

Morgan Stanley predicted that as wine exports to China increase, the profitability of bottle manufacturer Aurora will also improve. However, Bloomberg pointed out that changes in Chinese consumer preferences and a recession have reduced wine demand to about half of the 2019 level, which remains a variable.

The market also expects that exports of Australian beef and lobster to China could normalize soon, potentially leading to related stock price increases.

Bloomberg explained that as China pushes to expand investment in the Australian lithium market, optimism is emerging for related companies such as Liontown Resources, IGO, and Pilbara Minerals.

However, the outlook for Australian nickel companies remains uncertain due to the oversupply of Indonesian nickel supported by China. Wairu Metals, led by Australian billionaire Andrew Forrest, closed a mine in Western Australia last January, and the world's largest mining company BHP has begun reevaluating its nickel business, recording poor performance in the first half of the year.

Nonetheless, with expectations that metal demand will rise again due to China's economic recovery, BHP's stock price has attempted a rebound, rising 6% over the past month.

This content was produced with the assistance of AI translation services.