Trade tensions between Australia and China are poised to escalate which could put a $153 billion export market in jeopardy. Tensions have been growing between the 2 trading partners following the Australian government’s push to launch an independent inquiry into the COVID-19 pandemic.

In response, the Chinese government has retaliated to suggestions of an independent inquiry by imposing economic pressure. China recently suspended beef imports from 4 meat processing plants in Australia and has threatened to slap major tariffs on Australian barley exports.

Chinese businesses and consumers have been a reliable source of demand for many Australian goods and services. As a result, Chinese demand has an important role in the post-pandemic recovery of Australia’s economy.

Here are 3 ASX shares that are reliant on Chinese demand and could suffer from a potential trade war.  

Nufarm Limited (ASX: NUF)

Nufarm is a crop protection and specialist seeds company that supplies domestic and international farmers with support for food production. However, the company’s reliance on China as a supplier could put local farmers under pressure to produce crops and feed for livestock.

Nufarm’s supply chain is heavily exposed to negative repercussions from trade tensions with China. The company currently gets all of its products needed for agricultural production, such as herbicides and pesticides, directly from China. As a result, tariffs and supply constraints could have wider consequences.   

Elders Ltd (ASX: ELD)

Agribusiness companies like Elders could also be right in the firing line if trade tensions with China escalate. Elders is a leading supplier of fertiliser, chemicals and livestock to regional and rural Australia. The company also has strong exposure to trade with China.

Elders currently imports all the ingredients for its crop protection and fertiliser distribution business from China. In addition, the company is also involved in the direct sale and distribution of Australian beef and lamb to Chinese consumers.

According to reporting in the Australian Financial Review, the government’s select committee into COVID-19 and the security issues the pandemic raises will also look at the supply-chain risk around Chinese imports.

Treasury Wine Estates Ltd (ASX: TWE)

The Australian wine market is already under pressure following a harsh bushfire summer. Australia is the 5th largest exporter of wine in the world, with China accounting for the majority of the volume.

The operations of Treasury Wine reflects the wine industry’s reliance on China, with Asia being the company’s most profitable market. Treasury Wine relies heavily on demand from China, generating more than 40% of its total profits from Asia. The company’s prestigious and luxury brands, such as Penfolds, are highly popular in the Chinese market and offer better profitability margins.

Treasury has already downgraded its earnings forecast due to the COVID-19 pandemic. Trade tensions could put the company under further pressure given its poor performance in other international markets.

Foolish takeaway

Although iron ore and coal are the largest imports to China, companies in these sectors have a greater pull in Chinese trade. In my opinion, companies and businesses that are heavily reliant on China for growth in the short and long term are the most susceptible to trade tensions.

More reading

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• How a Chinese boycott could impact these ASX shares
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• Treasury Wine share price falls 5% as it faces another class action
• Have ASX shares in the Australian wine sector bottomed?

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia has recommended Elders 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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Is the Telstra Corporation Ltd (ASX: TLS) share price a good long-term buy today?

TLS shares are indeed having a strong day – up 1.13% at the time of writing to $3.12. However, Telstra shareholders are still significantly underwater so far in 2020  and a long way from the near-$4 levels we were seeing in January and February.

So does this mean it’s a good time to jump into Telstra? Well, let’s take a look!

Why Telstra shares have dipped in 2020

Like most ASX shares, Telstra has not escaped from the ravages of the coronavirus unscathed. The company was forced to cut back on its T22 cost-cutting strategy earlier in the year, which was to involve job cuts. Whilst this is great news for Telstra’s employees and (in my opinion) the right thing to do, it will mean that the company won’t be as profitable in 2020 and 2021 as a result. This partly explains the depressed Telstra share price, in my view.

Nevertheless, Telstra has maintained the interim and special dividends that it paid in March at 8 cents per share and has given no indication that its final dividend (due to be paid in September) is under threat.

On current prices, that would give Telstra a dividend yield of 5.13%, or 7.33% grossed-up with full franking credits.

Are Telstra shares a long-term buy today?

As a dividend share alone, I think Telstra is worthy of consideration for a portfolio today. It is a very defensive company – we are all willing to pay for internet and phone services through thick and thin these days. In this era of ultra-low interest rates, I think a solid dividend adds a lot of value to this company.

Looking forward, I see a lot of value in the Telstra share price, too. The company is investing heavily in 5G technology which has the potential to overhaul the 4G tech that’s currently in use across all mobile devices. Applications for 5G range from the Internet of Things (IoT) to improved healthcare and ‘smart cities’.

As the country’s biggest telco with the most cash to throw around, I think Telstra stands to benefit most from the rollout of 5G and I think every Telstra shareholder should be excited about the potential of this new technology for the company.

Foolish takeaway

I think there’s a compelling case for a long-term buy with Telstra shares at current prices. Right now, Telstra is a solid dividend stock with a robust yield but there’s also the potential of the future 5G to look forward to. There’s hopeful upside without too much downside, a combination I like!

More reading

• 3 blue chip ASX dividend shares to buy right now
• Why high yield dividend shares can be detrimental to your wealth
• Is it time to buy ASX small caps for your portfolio?
• Top ASX Dividend Stock Picks for May 2020
• 3 high quality ASX shares for a retirement portfolio

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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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The S&P/ASX 200 Index (ASX: XJO) has fallen heavily over the last couple of months due to the coronavirus pandemic.

This has led to some of the shares on the index trading at a significant discount to their highs.

Three ASX 200 shares that are down 30% or more in 2020 are listed below. Are they bargain buys?

Australia and New Zealand Banking Grp Ltd (ASX: ANZ)

The ANZ share price is down 37% since the start of the year. Investors have been selling the bank’s shares due to concerns over the impact the pandemic is having on its profits and ultimately its dividends in the near term. This was evident in ANZ’s recent half year results, which saw the bank post a 51% decline in profit to $1.55 billion. This decline was largely the result of credit impairment charges of $1.674 billion and led to the bank deferring its dividend. While this was disappointing, I’m optimistic that the worst is now priced into its shares. So, with Australia on the path to reopening, now could be a good time to invest.

Nearmap Ltd (ASX: NEA)

The Nearmap share price is down 37% in 2020. The aerial imagery technology and location data company’s shares were sold off earlier this year due to a number of downgrade/churn events which led to Nearmap downgrading its guidance. While this was disappointing given its long track record of smashing expectations, I feel confident it is just a temporary headwind and its long term outlook remains very positive. In addition to this, the company has recently announced cost cutting measures and expects to be cash flow breakeven by the end of the financial year. This means the risk of a dilutive capital raising is now very small. In light of this, the quality of its product, and its massive market opportunity, I believe Nearmap would be a top option for patient investors.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

The Sydney Airport share price has fallen 37% since the start of the year. This sizeable share price decline has been driven by the coronavirus pandemic and the impact it is having on passenger numbers. There’s no denying that the short term outlook is bleak, but things will improve as restrictions ease. I suspect that its shares will begin to rerate higher as its passenger numbers recover. This could make it worth being patient with Sydney Airport’s shares and holding them with a long term view.

More reading

• This is the best ASX big bank stock you can buy right now
• How can the ASX 200 soar with rising unemployment?
• ASX 200 down 0.9%: CBA reveals $1.5bn COVID19 provision & gold miners charge higher
• Dividends are drying up – but not for these ASX shares
• Safe dividend stocks to buy today for the COVID-19 world

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. 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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