1 January 2019 was a key date for a select group of Australian stocks.
You see, just yesterday the ChAFTA — the Chinese-Australia Free Trade Agreement — turned to a new chapter. And a potentially very lucrative chapter for Australian food producers at that.
So, what changed?
Well, a bunch of tariffs — taxes imposed on imports by the Chinese government — on pork, milk, seafood, alcohol and live animals just got wiped to zero.
A whole host of other agricultural products such as beef and processed foods also had big reductions to existing tariffs go through.
This puts Australian producers in a prime position to take advantage of a huge opportunity to feed China’s growing middle-class consumers. This cohort of people are literally hungry for the freshest and finest food Australia has to offer.
Make no mistake this is a big deal.
The market is estimated to be worth up to $13.5 billion to Australia right now. That’s doubled since just 2011.
And with the ChAFTA now kicking up a gear, the opportunity just got even more lucrative.
So, how can you grab your slice of the action?
You could start by looking here…
How can you get in on this action in 2019?
If you’ll indulge me for a second, let me tell you a quick anecdote of something that caught my eye over Christmas.
Now I’ve been following this China-led dining boom story for subscribers of my small-cap investing newsletter — Exponential Stock Investor — for some time now.
So it’s not a new story to me.
But it was only over Christmas that the reality of this boom became a whole lot more visceral.
You see, a relative of mine was over for Christmas from Adelaide with his Chinese girlfriend. The girlfriend’s Chinese mother was also over for an Australian holiday and spent Christmas Day at my house with my family.
Now, they’re fairly well off, and the Mum is known in China as a ‘tai-tai’. In Chinese this is the term given to a wealthy married woman who does not need to work.
So how did this ‘tai-tai’ spend most of her holidays?
According to my relative girlfriend who was translating, her Mum couldn’t get enough of the seafood on offer in Australia.
Every night was a new restaurant for a spaghetti marinara, mussels or just some beautiful Murray Cod. She said that the quality of the seafood in Australia was far better than she can get in China.
Anyway, I think you see where I’m going with this.
Seafood is a huge opportunity for Australian food exporters. And to that end, there are a number of companies worth checking out on the stock exchange.
Murray Cod Australia Ltd [ASX:MCA], Clean Seas Seafood Ltd [ASX:CSS], Tasman Resources Ltd [ASX:TAS] and Angel Seafood Holdings Ltd [ASX:AS1] to name a few.
Though to be clear the seafood game is an industry fraught with unique risks such as disease and weather, so be very careful here.
But back to the big picture opportunity. It’s not just seafood. You’ve the whole smorgasbord of companies in the agricultural sector to look at…
The dining boom is real
The main point I want to get across today is that the oft-mentioned ‘dining boom’ is a real phenomenon.
It’s not just some quirky marketing gimmick dreamed up by politicians or small-cap food companies.
The latter half of 2018 saw some key deals going through in this area. Events like the takeover by private equity of Capilano Honey by Chinese-focused investors.
A lot of the excitement here was drowned out by shaky markets where fear dominated greed. So in my mind the opportunity to get in here is still very much on.
It’ll be interesting to see the profit reports coming in later this year with six months of tariff-free trade feeding into the numbers.
This sector could definitely be one to watch in a big way in 2019.
Contributing Editor, Money Morning
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