Australia, a country where it seems to be a better place to have a holiday than to invest in. Located so far away from the rest of the world that it becomes “out of sight, out of mind”. Yet there is a lot of opportunity in Australia, their stock market is valued at $1.9 trillion in size, making it one of only 16 exchanges globally that has a megacap of over $1 trillion USD. In recent times, we have experienced global structural changes that impact all aspects of a country (ie, social, economic, political etc.) and in doing so come to define what our future looks like. Examples include an aging population, rise of eCommerce and transition to a renewable energy grid.
We have broken down the opportunities to 3 key themes for you below and also listed a few key stocks that may help will kickstart your research process.
1 – Food Bowl of Asia
With huge acres of arable land, sunshine and plentiful water across the northern states and territories, there are high hopes for Australia’s post-mining future pinned on its ability to produce enough agricultural product to feed Asia’s rapidly growing population.
Currently, Australia’s agricultural sector produces enough food to feed 60 million people. No one is expecting them to satisfy the demand of this 3 billion strong Asian middle class, but given their unique position in the premium end of the market, Australia’s agricultural exporters are given a branding to export their products, leading to a degree of pricing power.
Perceptions of products made in Australia continue to improve, as shown by the Australian Government’s survey of mainland Chinese consumers. In 2010, Australian wine scored 7.69, by 2018 this was 8.32. Treasury Wine Estates (ASX: TWE) is one Australian company that has benefited from this perception, as their share price has risen 3-fold in that time.
2 – The Future of Energy
Australia’s energy sector has one of the most depressed and gloomy outlooks. This was partly caused by the government unable to agree on an energy policy (They changed 5 Prime Ministers in 10 years, most of them due to unpopular energy policies). All this has created uncertainty for markets and that has been reflected in energy prices.
Amidst this chaos lies opportunity for investors. Australian companies like Santos (ASX:STO), one of Australia’s largest producers of gas to the domestic market, are well positioned to take advantage of the global transition away from coal to a gas and renewables mix. Gas is expected to overtake coal and become the world’s second-largest energy source by 2030 and Australia is the world’s largest exporter of LNG.
Even so, the energy sector remains full of uncertainty and likely to only attract investors willing to weather this risk. Yet, the broader global trend is not slowing down as the world transitions away from coal to a gas-renewables mix. Hence, I feel it is worth keeping an eye on Australia, the world’s largest LNG exporter.
3 – Visit Australia
According a report by Deloitte, strong performance in Australia’a tourism sector in 2018 has seen the sector’s growth outpace the national growth rate for the third consecutive year.
International arrivals are expected to grow 4.9% this year and it is well supported by their low Australian Dollar. Areas of interest are Perth, Sydney and Melbourne. Hotel demand is also expected to remain stable which hotel companies like Crown Resorts (ASX:CWN) stand to benefit from the growing tourism sector.
With good food, wine, unique natural wonders and some of the world’s exclusive animals living there, it’s an incredible place with huge prospects for investors. I believe that the Australia’s tourism industry is very resilient and competitive and it is likely to continue to have new opportunities for growth.
One of the companies that I’m looking at is SeaLink Travel Group (ASX:SLK), a company that operates tourist and travel services. Those that have visited Sydney would have taken one of their cruises, the Captain Cook Cruises (market leader).
Conclusion
Australia sits in a unique position for the coming century and investors would do well to pay attention. Hell, maybe you can even use it as an excuse to come down here for your next holiday. Finally, I hope this article helps to expand your perception of Australia in terms other than their “nope” animals, great beaches and kangaroos.
Cheers