As per the media report, ace investor and veteran, Mr. Warren Buffett responded over the recent tweet by the U.S. President Donald Trump to raise tariffs on US$200 billion of Chinese imports from 10% to 25% and imposes fresh tariffs on US$325 billion of Chinese goods which are not taxed. Mr. Buffett stated that the trade war is not good for the global businesses and may pose a threat to the lowering of global growth rate forecasted by the IMF and World Bank. Berkshire Hathaway owned by Mr. Buffett has huge investments in the companies that have businesses in China, including Apple with US$50 billion investment. There are concerns among the Chinese companies that with the imposition of new fresh tariffs, the cost of exports and imports will rise, which may lead to either shut-down of various companies or force them to shift to other countries (especially ASEAN countries) with lower risks.
The tweet was negatively responded by the global markets, Japan’s Nikkei fell by 1.3%; U.S. stock futures for the S&P 500 fell by 0.48%; ASX 200 dropped below 6300 levels in nine sessions; Shanghai’s composite 300 fell over 5%; Hang Seng index fell by 2.9%.
As China is Australia’s biggest export market, the slowdown in the Chinese economy would affect Australian companies in various sectors, which can be seen from the below table.
Major Australian commodity trading partners of China are BHP Group and Rio Tinto Limited. Let’s see how the stocks of these companies have performed.
BHP Group (ASX: BHP)
Its revenue from continuing operations increased by 1% pcp to US$20.74 billion n in H1 FY19. BHP’s profit after taxation attributable to the members of the BHP Group increased by 87% pcp to US$3.76 billion in H1 FY19.
At market close on May 7, 2019, the stock of BHP Group was trading at $37.300, up 1.359% with a market capitalisation of $109.06 billion. Its current PE multiple is at 25.180x, and its last EPS was noted at $1.461. Its annual dividend yield has been noted at 4.53%. Today, it touched day’s high at $37.500 and day’s low at $37.160 with a daily volume of 7,348,491. Its 52 weeks high and low stands at $40.130 and $29.062, respectively, with an average volume of 6,737,506. Its absolute returns for the past one year, six months and three months are 20.13%, 14.40%, and 2.28%, respectively.
Rio Tinto Limited (ASX: RIO)
In its annual results for the year 2018, RIO reported record cash returns of $13.5 billion to its equity holders. Its underlying EBITDA was reported at $18 billion.
At market close on 7th May 2019, the stock of Rio Tinto was trading at $96.050, up 2.246% with a market capitalisation of ~$35.06 billion. Its current PE multiple stands at 8.360x, and its last EPS was noted at $11.238. Its annual dividend yield has been noted at 4.49%. Today, it touched day’s high at $97.050 and day’s low at $95.640, with a daily volume of 1,764,111. Its 52 weeks high and low price stands at $102.830 and $66.978, respectively, with an average volume of 1,890,613. Its absolute returns for the past one year, six months and three months are 20.19%, 19.82%, and 7.00%, respectively.
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