There has been a lot of talk about China, the size of its market and the riches which await any company that can capture even a small share.
What a lot of investors may not understand is the manner in which the market in China works and the influence the Chinese government has on market participants. Investors in companies such as Blackmores Limited (ASX: BKL) will be acutely aware that government policy can change rapidly which can radically alter a company’s outlook.
With this in mind I have started investigating companies which are tapping into the Chinese market, although their main game is outside of the mainland.
Idp Education Ltd (ASX: IEL)
Having spent a large part of my working career in the university sector I am very much aware of the rise in the number of overseas Asian students studying at Australian universities. This is where Idp Education comes in. Overseas students studying in Australia are required to prove their proficiency in the English language. Idp Education provides both teaching and testing for English skills along with student placement. In my opinion as China’s middle class grows the demand for students to be educated in western countries will continue to increase.
BWX Ltd (ASX: BWX)
BWX sells a range of natural skin care products and is currently looking to launch its products into the Chinese market. Even without the Chinese market, sales are already growing strongly. I believe natural skin care products will be welcomed into the Chinese market as research shows Chinese consumers place a high value on product purity. What I like about BWX is that its current sales growth outside China will see it continue to trade very profitably as its Chinese market takes hold.
Retail Food Group Limited (ASX: RFG)
As an Australian investor looking for exposure to the Chinese market, Retail Food Group would be my preferred vehicle. I base this opinion on its approach into the Chinese market which was done via a joint venture with a well-known Chinese company. The agreement sees Retail Food Group retaining a share of the Gloria Jean’s coffee brand while the JV partner takes care of the day to day running of the stores. As I touched on in the introduction, taking a Chinese partner in my opinion is a smart move not only for its connections, but its knowledge on the right and wrong way to conduct business in China
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Returns As of 6th October 2020
Motley Fool contributor Alan Edmunds owns shares of Blackmores Limited, BWX Limited, Idp Education Pty Ltd, and Retail Food Group Limited. The Motley Fool Australia owns shares of Retail Food Group 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 Bruce Jackson.
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