In 2013, Credit Suisse’s top Chinese economist, Dong Tao, gave a speech to Brazilian delegates. What he said was so radical and so disliked, that bodyguards had to escort him back to the airport.
Tao told Brazil, a nation built on commodities like Australia, that the commodity super cycle was over. As a result, Brazil’s mining stocks dipped 5%.
Tao gave the same speech in Australia, later that year. However, many of our chief analysts refused to believe him. Of course, we know now that Tao was right.
Commodity Prices & Demand
Commodity prices have never been as high or in such demand, as they were around 2012–13. Take a look at the charts below of the Reserve Bank of Australia’s (RBA) commodity price index alongside the price of iron ore, thermal coal and coking coal:
Tao is Back in Aus
Tao is now back in Australia this week. And he’s bringing similar bearish views on Chinese demand for iron ore and coal. As reported by The Australian Financial Review:
‘This time round, the market would be wise to pay more attention. Tao, one of the first to predict the end of the China-driven commodities super cycle, says Australia’s weakness is that it has relied too long on China’s insatiable appetite for steel and is not planning for the Asian nation’s transition to a consumption-led economy…
‘It is obvious Australians can sell beef and wheat to the Chinese but it can do a hell of a lot more if people do their homework properly…
‘Supply creates demand. Before Steve Jobs there was no concept of a smartphone. The product iPhone changed people’s consumption. The same thing can be said about the potential of the Australian supply chain to the Chinese market.
‘I’m here for two days. I love the air, the sunshine, the food and the people here. If I like it, most Chinese will like it. So go and figure out how to tap into the Chinese wallet. It is of critical importance for Australia to figure out what it is going to do.’
Aussie Tourism Market Opportunities
Essentially, Tao is telling punters to look for opportunities within the Aussie tourism market. Companies that already experienced huge price climbs include Qantas Airways Ltd [ASX:QAN] and Sydney Airport Holdings Ltd [ASX:SYD]. Both stocks are up more than 90% and 20% respectively, year-to-date.
While China won’t stop using iron ore or coal overnight, the explosive demand is taking place in consumer trends, not commodities. And it could be Aussie investors who might have the best chance to profit from this.
Junior Analyst, Markets & Money
PS: China loves many things about Australia. In particular, they love Aussie property. As China pulls more citizens out of poverty and into new-found wealth, it could mean more money flooding to Australia, going straight into the hottest property spots.
To find out how you can capitalise on the Aussie property boom, click here.