12 stocks that could benefit from the China free trade deal

China flagThe Chinese A50 index surged some 30% in the six months to end 2014, even though the Chinese economy appeared to be slowing. This period also corresponded with a crash in the iron ore price and general pessimism from abroad about the Chinese economy… So what’s going on, and most importantly for you and I, how can Australians benefit?

Background

The A50 index contains the top 50 A-class shares on the Shanghai and Shenzhen stock exchanges but is dominated by large financial firms, mainly banks and insurance firms, that stand to benefit from lower rates and the increased urbanisation of the country.

Investors can get access to the index by using an exchange traded fund, however there are no ETFs targeting the A50 listed on the ASX yet. Investors with an Interactive Brokers Group, Inc. (NASDAQ: IBKR) account can easily access the Hong Kong market and purchase units in the ETF named iShares FTSE/Xinhua A50 China Trkr (ETF) (HKG: 2823), or investors could get a little more strategic about it.

ASX-Listed Companies

Savvy investors will note that there is now a fairly large contingent of companies listed on the ASX that can provide exposure to China. Here are 12 great ideas:

  • Milk and cereal producer Freedom Foods Group Ltd (ASX: FNP)
  • Beef and crop producer Australian Agricultural Company Ltd (ASX: AAC)
  • Cheese producer Bega Cheese Ltd (ASX: BGA)
  • Wine producer Treasury Wine Estates Ltd  (ASX: TWE)
  • Almond company Select Harvests Limited (ASX: SHV)
  • Fish producers Tassal Group Limited (ASX: TGR) and Clean Seas Tuna Limited (ASX: CSS)
  • Asian-exposed big bank Australia and New Zealand Banking Group (ASX: ANZ)
  • Services group Leighton Holdings Limited (ASX: LEI)
  • Construction group Lend Lease Group (ASX: LLC)
  • Woolworths Limited (ASX: WOW) has recently purchased a Chinese liquor distribution network
  • And even potentially the ever-divisive Chinese clothing manufacturer Sunbridge Group Ltd (ASX: SBB)

Risky Business

The problem that some investors face with direct investments in Chinese shares is the perceived lack of transparency. The 12 companies listed above (potentially with the exclusion of Sunbridge depending on who you talk to) have the benefit of an ASX listing and all the checks and balances that are required to enjoy that benefit.

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The Motley Fool's disclosure policy is accountable. Of the companies mentioned in his article,Motley Fool contributor Andrew Mudie owns shares in iShares FTSE/Xinhua A50 China Trkr and Freedom Foods, while Bruce Jackson has an interest in Woolworths. Please remember that investments can go up and down. Past performance is not necessarily indicative of future returns. The Motley Fool does not guarantee the performance of, or returns on any investment. All figures are accurate as of 5 December 2014. Authorised by Bruce Jackson.

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