What’s in Store if the China Trade Relationship is Revived?
By Dale Gillham and Fil Tortevski
After years of frosty relations, Australia and China may finally be warming up again and the implications for our economy are massive. Prime Minister Albanese’s recent visit to Beijing wasn’t just a diplomatic gesture, it was a strategic move to revive a $280 billion trade relationship that’s been the backbone of our economy.
The Prime Minister visited China with the CEOs of BHP, Rio Tinto, and Fortescue by his side, sending the message that the trip was about business. China still buys more than 30 per cent of our exports from iron ore and LNG to lithium.
Years of political tension and trade barriers has hit our industries hard, but now, the door is reopening, and markets are watching.
Which sectors will benefit from the trade relationship?
For the mining sector, this could be the turning point from flat to firing. For Treasury Wine Estates (ASX: TWE), it’s a potential lifeline. China was once a billion-dollar market for Aussie wine and TWE wants back in.
And there’s more at stake with tourism, education, and investment all on the table. China remains our biggest source of tourists and international students. If relations keep improving, these sectors could roar back to life.
But there’s a challenge: managing the delicate balance between our top trading partner, China, and our key strategic ally, the US. If played right, this visit could be more than a reset, it could be the start of Australia’s next export and resource boom.
What were the best and worst-performing sectors last week?
The best-performing sectors included Information Technology, up 5.19 per cent followed by Health Care up 4.80 per cent and Real Estate, up 2.75 per cent. The worst performing sectors included Consumer Staples, up 0.90 per cent followed by Materials, up 1.31 per cent and Utilities, up 1.38 per cent.
The best performing stocks in the ASX top 100 included Life 360, up 14.89 per cent followed by HUB24 Limited, up 11.49 per cent and Pilbara Minerals, up 10.32 per cent. The worst-performing stocks included South32 Limited, down 7.07 per cent followed by James Hardie, down 4.43 per cent and Endeavour Group, down 2.66 per cent.
What's next for the Australian stock market?
The All-Ordinaries Index has finally done it, surging past its all-time high and closing the week up more than 2 per cent, even tagging that long-awaited 9,000 level. It’s a mark we’ve been eyeing for weeks in our market reports, and the way the index powered through it shows clear strength from the buyers.
Adding more fuel to the fire, last week’s uptick in Australia’s unemployment rate to 4.3 per cent has raised the odds of a rate cut at the next RBA meeting. And as we know, lower rates are often rocket fuel for equities. With the market now in record territory, a clean move toward 9,200 looks very possible.
That said, we haven’t seen a meaningful pullback since the June low. And now that we’ve broken well above the previous all-time high, don’t be surprised if the market takes a breather over the coming weeks. A short-term pullback here would be healthy, not bearish.
So, what’s behind this rally and more importantly, how sustainable is it?
The materials sector has been leading the charge, and that’s a positive sign for the broader market. If the upcoming earnings season posts significant beats on expectations from the big players, which will begin next month, we could see an even stronger rotation into the sector, pushing the index well beyond 9,200.
In the end, it all comes down to timing. Do you get in early ahead of earnings, or wait for confirmation and trade the reaction? Either way, the path forward demands disciplined stock selection and tighter risk management. The next few weeks could be pivotal.
For now, good luck and good trading.
Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.
