ASX investors have brushed aside the deteriorating relationship between Australia and its most important trading partner even though more than half of the S&P/ASX 200 Index (Index:^AXJO) stocks are heavily reliant on China for income.
Just as you thought things between the two countries couldn’t get any worse, China boots out all Aussie journalists from its borders.
New low in Sino-Australia relationship
The Australian Financial Review correspondent Mike Smith and Australian Broadcasting Corporation reporter Bill Birtles returned home out of fear of arbitrary detention, according to the BBC.
This is the first time that Australian journalists have not been on the ground in the Asian nation since the 1970s.
Make no mistake fellow Fools. The development marks a new low for bilateral relations with China targeting Australian barley, wine and beef exports.
When China sneezes
If you had any doubt about how intertwined the Australian economy is with the world’s second largest economy, a note by Jefferies lays bare our dependency on China.
The broker found that around 55% of our top 200 stocks are at risk from the souring relationship, reported Bloomberg.
Mining giants like BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) are the obvious inclusions, although they are lucky that China needs our ore as much as we need to sell it to them.
Others are less fortunate. This means a wide range of large cap ASX stocks could follow the Treasury Wine Estates Ltd (ASX: TWE) share price crash.
The TWE share price tumbled last month after China opened investigations of dumping by Aussie wine makers.
ASX stocks at risk of China’s wrath
Other stocks that Jefferies’ analysts believe are at risk include online job classifieds group SEEK Limited (ASX: SEK), which owns websites in China; and consumer goods suppliers A2 Milk Company Ltd (ASX: A2M) and Blackmores Limited (ASX: BKL).
Even our banks are immune from China’s wrath. A falloff in Chinese immigration and investment is likely to prolong the COVID-19 induced housing slump.
This will hit home lenders like the Commonwealth Bank of Australia (ASX: CBA) share price and Westpac Banking Corp (ASX: WBC) share price, just to name a few.
Tourism stocks could suffer second blow
Further, Chinese tourists make up the large source of short-term arrivals into this country. If the Chinese government makes it harder for its citizens to holiday here, the Sydney Airport Holdings Pty Ltd (ASX: SYD) share price and Qantas Airways Limited (ASX: QAN) share price are likely to suffer.
We also shouldn’t forget how reliant casino operators like Crown Resorts Ltd (ASX: CWN) and Star Entertainment Group Ltd (ASX: SGR) are on Chinese high-rollers.
These stocks are among the biggest casualties of the coronavirus pandemic and are struggling to recover from the crisis.
If China turns off the travel tap, these ASX stocks will take a much longer time to recover and could fall to their COVID-19 lows again.
Let’s hope both governments kiss and make up soon.
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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Commonwealth Bank of Australia, Rio Tinto Ltd., and Westpac Banking. Connect with me on Twitter @brenlau.
The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Crown Resorts Limited and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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