Richlink Capital: Specific Investings Directions in AU Market

Key points：

• Characteristics of the Australian capital market
• Specific great investment directions under rate hikes
• 3 points to screen companies with high-growth potential
• Regarding Australia's iron ore, lithium ore, and China in detail
• Some Risk Aversion Concept sto share

You may interested in read: Richlink Capital: Australia's Recession & Real Estate Investing Under Rate Hike

Source from Jason Zheng, the chairman of Richlink Capital Group., a guest on Tiger Live to share his insights on the Australian economyand investing.

Richlink Capital Group is a global asset management organization featuring family offices, with branches in Sydney, Australia, Hong Kong, Shenzhen, Xiamen and Beijing, China.

https://richlink.com.au/people/

The following are sumarizes of Professor Zheng's sharing on Australian investing directions and sepecifical industries under rate hike.

1. What are the characteristics of the Australian capital market and the Australian stock market?

Professor Zheng:

The Australian stock market is not that complicated. The market value is not very big, less 3 trillion Australian dollars. However, the influence of the Australian stock market companies in the global mining companies is indeed very large.

The material and mining energy companies of the Australian capital market can account for more than 1/3 of the Australian information market. It can be said that basically all well-known mining companies are listed in Australia. In the Australian capital market, various resource stocks, energy stocks, and food stocks and consumer stocks all look very good.

Source: australianresources.com.au

In my opinion, the Australia is a God-blessed Country, the Australian stock market appears to be more growth-oriented than the Chinese stock market and even more so than the US stock market.

2. What are the specific good investment directions under rate hikes and recession?

Professor Zheng:

Fixed-interest bonds are the most popular given the expectation of an extension market. Many investors are willing to buy bonds, three or five years and so on. The stock market or other assets with relatively strong liquidity, even housing market investing have been reduced a lot.  Gold bonds can get a stable fixed income, including some real estate bonds in Australia that are doing well at present, which with a yield of close to 6~8%.

In addition, in such an environment, it is necessary to enhance the ability to select the most valuable stocks. The first and most important thing is that you have to stand on the runway, other wise it will be difficult for you to make money. From the perspective of value investing, holding growth stock for a long time is a very valuable and good arrangement.

3. How to screen companies with high-growth potential?

Professor Zheng:

There are 3 points you must grasp：

• The first point is whether the industry or company in its market faces real huge growth potential. No matther the market is in China, in North America, or in Australia and so on.
• The second point is whether the management team is innovative, robust and transparent.
• The third point is you are optimistic about the company's technology, resources, its business model, and its innovation.

If you grasp these three points accurately, then this company may have relatively strong future growth in the capital market.

So it is very important for everyone to understand the big environment.

For investment in the Australian market, it is necessary to understand the macro policy, the impact of the United States on the world, the situation in China and the situation in Australia.

Specifically: investing in iron ore and lithium ore is a good direction.

Source: www.reuters.com/

4. Talk about Australia's iron ore, lithium ore and China in detail:

Professor Zheng:

First, let’s talk about Australia’s iron ore exports to China. In the past ten years, from 30 yuan to 50 yuan per ton, then to 100 yuan, the highest charge is more than 200 yuan, and now it is back to more than 100 yuan.

And what is the price cost per ton of iron ore? 20+ bucks. So when it comes to 30 yuan, there is still profit, and when it reaches 200 yuan, the profit is seven or eight times.

If the real estate industry continues to heat up gradually, the demand for iron ore and other demands for building materials and other aspects will drive the development of the overall economy. Then Australia also benefits from the development of this Chinese real estate industry.

Let's see, will lithium mines continue to rise? This key core depends on how the Chinese market develops. Because China now owns 7% of the world's lithium, but produces 85% of the world's lithium batteries, where does the lithium raw material come from? It's imported from Australia.

Australia is currently the world's largest producer and exporter of lithium ore. Therefore, some industries related to all lithium mines in Australia are rising in price, and some are constantly rising. Since 2021, the price of lithium ore has increased tenfold, or even hundreds of times.

Like this lithium mine, there are various other electromagnetic-related materials of different negative and positive materials, involving different fields such as lithium batteries and new energy vehicles. And this market in China has greatly driven the development of the global lithium mining industry. So from this aspect, I think the development of the Australian lithium mining industry should be combined with the Chinese market.

Therefore, although the overall impact of interest rate hikes on the world is uncertain, investor are worried about the decline in housing prices, losing confidence in stock trading…… However, if you don’t actively build positions and make some corresponding strategic adjustments, you may also lose some opportunities in the future.

5.Finally, Some Risk Aversion Strategies.

Of course, I also advise everyone not to put eggs in just one basket, but also not to put baskets on just one truck.

You may be in the process of asset allocation, you can buy stocks, bonds, real estate funds, fixed income, and some industries of bank cash management.

In terms of regional allocation, Tiger trade also provides stock trading in Australian stocks, Hong Kong stocks, Singapore and other markets.

Another concept, if you have a slightly larger capital investors in Australia, I suggest you have a structure to use your FOF tool, make a family trust, and then invest in bonds, stocks and so on. This is also a very good concept from all aspects of tax arrangements.

That's it all for Jason Zheng's sharing, hope it will be helpful to your investment ideas.