China's burgeoning consumer market will help propel the earnings of Australian companies that export to the region, including makers of luxury and branded goods, according to an investment specialist.
Fidelity Australian Opportunities Fund portfolio manager Kate Howitt said Australian producers of wine, handbags, clothing, watches and jewellery were in line for growth, as well as education, transport and logistics companies.
"Consumption [in China] is growing at an annual pace of about 8 per cent, as policymakers take steps to boost consumption's share of GDP (gross domestic product) from less than 40 per cent of output towards 70 per cent," Howitt said.
"While we don't have absolute-must-have icons, such as Germany's BMW, France's LVMH or Italy's Prada, to capitalise on the opportunities in China, Australia has credible brands to exploit such a lucrative market.
"Treasury Wine Estates (TWE), which sources nearly 20 per cent of its revenue from Asia, is one of many Australian stocks poised to benefit from China's expanding consumer firepower.
"A country of a million millionaires turning into wine snobs is a big opportunity for TWE, the owner of Penfolds, whose fame has spread to China by word of mouth."
Oroton, which designs and makes luxury leather goods, was expected to eventually include China as part of its plans to open four stores a year in Asia, she said.
The overall rise in wealth and living standards in China is also helping to propel earnings of health stocks, such as Blackmores, blood-products maker CSL, ear-implant manufacturer Cochlear and ResMed.
Other sectors to benefit include education. "China was the largest source of international student enrolments for Australia in 2010," Howitt said.
Education service providers such as Navitas would benefit from that growth, she said.
So too will Sydney Airport, with more Chinese tourists flying into Australia. The logistics and transport sector will also benefit, including Goodman, Brambles and Toll.
However, AMP Capital head of strategy Shane Oliver said he did not share the optimism.
"If it was a decade ago, it would be the whole stock market which would benefit. But now, it's a lot harder to say any sector will benefit. High interest rates in China and the slowdown there have depressed everything else," Oliver said.
UBS Wealth Management head of investment strategy and consulting George Boubouras said some multinational companies offered better growth prospects than locals.
Boubouras has developed a portfolio of multinational companies called the International Equity Satellite Portfolio, which has good earnings prospects from emerging nations, particularly China.
The portfolio includes Apple, Bayer, Johnson and Johnson, Nestle, Unilever, eBay, Google and LVMH.
"Locally, there is no real significant direct link outside of materials/energy into China to the same degree as some of these multinationals," Boubouras said.
