Ever since the Australian government publicly questioned China on the origins of the coronavirus, diplomatic relations between the two countries has deteriorated. China is Australia’s biggest trading partner. Mining and education are two huge sectors that contribute massively to Australia’s GDP. Any bad blood between the two countries is just bad for business.
This week’s news talks about Chinese coal traders confirming reports that China has ordered its state-owned steel makers to not import coal from Australia. Political powerplays look to be underway as the China is using economic retaliation against Australia. BHP reported that a few of its Chinese buyers had deferred coal shipments. However, there has been no official word from China as of yet regarding the situation.
Coal & Energy Stocks
Coal and other energy stocks still have a lot to give and China is the largest consumer of the commodity. With low oil prices and coal prices already damaging energy stocks this year, the news surrounding the imports will affect stocks further. The extent of the damage cannot be determined just yet, however, there will be swings in stock prices for these energy stocks.
With energy and mining still playing a huge role to the Australian economy, investors will still want to be exposed to the sector. However, picking the right stocks with limited country risks becomes crucial. That being said, our equity reports should give investors more clarity over which energy stocks or coal stocks are less exposed to risk from China.