If you've been living under an investor-shaped rock for the past few years, you may not know much about which S&P/ASX 200 Index (ASX: XJO) shares are influenced by the daigou channel.
The daigou channel is a term used to describe Chinese expats living in Australia who are buying and selling Australian consumer goods to send back to the Chinese mainland, where many of these products are unavailable.
This practice is bigger than you may think. Many Chinese students studying in Australia make a living from reselling these items, with full-time resellers in China who buy and then on-sell a whole range of products.
Unsurprisingly, among the big earners from this practice are companies within Australia's adult nutrition and care (ANC) and baby nutrition and care (BNC) sectors. These companies produce products with the marketability of Australia's clean, organic image that strongly resonates with Chinese consumers.
This industry took a towelling in 2020 as COVID-19 slammed borders shut and backlogged international freight. But with vaccinations rolling out and many industries ticking off the days until borders can reopen, it's worth knowing which companies are significantly impacted by the daigou channel status.
2 ASX 200 shares that rely on the daigou channel
Blackmores Limited (ASX: BKL)
Natural health product manufacturer Blackmores has suffered greatly from the halt of the daigou channel and market uncertainty in China. In 2016, the Blackmore share price reached a high of more than $200, before bottoming at $60 in September last year.
Those figures help highlight the degree to which significant Chinese market exposure can wreak havoc on a company's share price. The company's FY20 full-year results showed a 16% drop in sales for the first half of 2020 that hasn't fully recovered.
The Blackmores share price is currently down 0.44% this week, but market sentiment around the company already appears to be changing. Blackmores shares have increased 5.44% this month following a 3% increase in half-year revenue to end 2020.
A2 Milk Company Ltd (ASX: A2M)
The A1-protein free milk producer has been one of the more volatile (and keenly watched) companies on the ASX 200 in recent months. The A2 Milk share price has fallen by more than 48% over the past 12 months. The company's shares reached their 52-week high of around $20 in late July 2020 but have fallen dramatically since then, now sitting at $8.33.
In addition to the impacts of a declining daigou channel, A2 Milk has also been hit with a myriad of other headwinds. Its chair and previous CEO have been engaged in a war-of-words in the media over the past fortnight, executives dumped millions of shares in the midst of the pandemic, and the company's reinvestment in the daigou channel hasn't sparked much confidence.
In positive news, however, A2 Milk has recently been focusing on expanding its penetration of the US market. At the current A2 Milk share price, the company has a price-to-earnings (P/E) ratio of 17.
