Changing Tide on the ASX

On Monday last week, I was invited to the listing ceremony associated with?Dongfang Modern Agriculture [ASX:DFM]?at the Aussie Securities Exchange (ASX) in Sydney.

‘In a moment, we will have a countdown according to custom. Feel free to join us,A said an ASX spokesman.

A crowd was standing on the Exchange floor, precisely one minute before 10am. With just 20 seconds until marketplace open, everybody got their phones out to take a picture…myself included. You can see some of the crowd in my photo beneath.

Then the countdown started…

10, 9, 8, 7… 3, 2, 1 — ding, ding ding! Dongfang Modern’s Chief executive officer, standing at the front of the crowd, rang a bell.

Everybody applauded.

This was my first time witnessing a listing. However, this isn’t too unique for veterans like Rich Li, the executive chairman of?GoConnect [ASX:GCN]. He has taken a number of companies community in his career, and he intends to continue doing this in the future.

But the listing of Dongfang Modern was a special occasion. It is the first privately-owned Chinese agriculture company to list on the ASX in over 20 years.

You may ask why that is so special.

You need to place this listing into perspective. Think about the free trade deal with China. And the ‘rebalancing’ the Book Bank of Australia (RBA) continues to be talking about. What could this suggest for agriculture in Australia?

Things tend to be changing on the ground, and as a trader you need to be aware of it.

The free trade deal with China means more exports of competitive Australian agricultural products to The far east, the world’s largest market. As well as Dongfang Modern’s listing in Australia has its proper considerations. They mean to tap into the liquidity of the Australian market, with a particular focus on Chinese agriculture and Chinese consumers.

The RBA has said that the Aussie economy has been ‘rebalancing’ well. These people mean that there has been a change from mining-focussed investments to other opportunities…such as agriculture.

For Australia, what this means is a few things. Agriculture will be warm as capital shifts to sectors that will benefit from the free trade deal and China’s rising consumer wealth.

It also means more Chinese agricultural companies will follow suit. They want to list around australia. They want to tap into the capital marketplace here.

Another point worth considering is the fact that Dongfang Modern, and other businesses under people like Rich Li, are privately-owned — as opposed to state-owned.

We are viewing the flourishing of private capital in all sectors in China, but particularly in agriculture.

It really comes down to culture

In my conversations using the management, brokers and other veteran investors at the event, there is a clear demand for more cross-cultural knowing.

Don’t take this point lightly. This is exactly what it really comes down to.

For Chinese businesses such as Dongfang and GoConnect to be found, they need a wider range of brokers, investment banks and institutional investors to understand the Chinese scene.

At the same time, it is really the company’s personal responsibility to make research, promotions and contacts more widely accessible. And in English!

Mr Li told me that a lack of understanding of the Australian market, culture, language, and economic climate often undermined the success of Chinese language companies in Australia. That’s a common problem with Chinese companies indexed by other parts of the world too.

And I understand exactly what Li is talking about…

Chinese tradition is quite conservative, and to an extent arrogant. It is not arrogant in the sense that it shamelessly pushes its culture outward. Quite the opposite. There is the lack of effort to create connections with the broader worldwide community.

In Western systems such as Australia, Chinese companies have to put in a lot more effort. They need to make their materials available in English and promote themselves inside the Australian capital market.

Just such as Chinese Premier Xi Jinping’s visit to the US and Britain. They need to set up understanding between cultures as well as break down those barriers.

The perfect time

Now is the perfect time to buy into rising market stocks. Why? Because we are going through a bottoming process for emerging markets, along with a sustained rally will soon be here.

The stocks on the New Frontier Investor buy list have rebounded by an average 5% during the last four weeks. For a number of stocks, the actual rebound was between 10-20%.

And that rebound looks to be just the beginning. Using analysis based on average target prices on the market, most of the stocks I’ve recommended look set see much more strong gains. Some should gain 5-15%, while a few should rebound 44-57%.

You can find out more about the actual emerging markets I recommend purchasing — and the stocks that should see the most growth in the coming several weeks — here.

Regards,

Ken Wangdong,

Emerging Markets Analyst, New Frontier Investor