Forget About US-China Trade Battle, Australian Businesses Have Optimistic Outlook For China

  • Nov 19, 2018 AEDT
  • Team Kalkine
Forget About US-China Trade Battle, Australian Businesses Have Optimistic Outlook For China

From the past few months, the news related to the trade battle between the United States and China continue to weigh down the investors’ confidence and thus, impacting the equity markets. The market players have even stated that the elevated levels of the trade battle have the potential to impact the business confidence severely. However, on the other hand, some of the Australian companies which are having their operations in China are having an optimistic outlook and thus, according to a report by a market expert, are ready to raise their exposure to the region. A survey was conducted among the 165 Australian companies which are having their operations in China. It was found that the businesses are highly optimistic about the future prospects even though there are ongoing tensions between the US and China.

China might be beneficial for the Australian companies and, as per the report by the market expert, the levels of enthusiasm are witnessing an uptrend. Two-thirds of the companies are hoping to increase their exposure in China moving forward while 60% are of the views that they would be raising the headcount. Over 80% of the companies are having a favorable outlook for the time span of the next two years in terms of the profitability. Clover Corporation (ASX: CLV) has been witnessing the positive momentum and has encountered improvement in the financial numbers because of the Chinese demand.

Moreover, China is also for the electric scooters and thus, benefiting Vmoto Limited (ASX: VMT). The International Energy Agency’s latest edition which focused on global electric vehicle outlook has anticipated that 2017 sales in regard to the electric two-wheelers stood at 30 million which led the levels of the stock to 250 million. The majority of these, i.e. over 99% was because of China.

As per the market expert, of the total companies which were surveyed, approximately 50% stated that they have encountered a rise in the engagement or attention from the authorities of China. According to the market participants, the robust improvement with respect to the infant formula sector was witnessed mainly due to increased regulatory stability within China. According to them, there was a situation in the last year when the infant formula sector was in flux, and the authorities of China made efforts which could help in bringing the number of brands down and enable differentiation with respect to the range of the products. He also added that the situation for the customers as well as authorities was confusing and since then they incorporated certain rules in order to promote the regulation. As a result of the stability, the companies which are listed in the Australian region had decided to increase their footprints in China.

At the time of writing, Clover Corporation is trading at A$1.425 per share which implies an increase of A$0.025 per share or 1.786%. The company has an annual dividend yield of 1.25%, and the stock price is trading towards the higher range.


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