A2's spilt milk
A2 Milk’s stock tumble and a budget warning from Jim Chalmers are a reminder of how vulnerable Australia's economy and sharemarket are to China.
Any investors who had grown complacent about Australia’s exposure to the unfolding economic downturn in China would have received a sharp wake-up call on Monday, following twin warnings from the government and a prominent listed company.
First, Treasurer Jim Chalmers warned overnight of a multi-billion-dollar hit to the federal budget due to a falling iron ore price, which stems from waning steel demand in China where a decades-long property boom has turned to bust.
Then, shares in A2 Milk — one of the most China-exposed companies on the ASX (and NZX) — took a whack as the market struggled to digest its latest numbers.
The stock tumbled more than 18% after the dual-listed, New Zealand-based infant formula maker and dairy producer issued soft guidance relative to lofty market expectations, citing problems in China, its most lucrative market. The company still expects “mid single-digit revenue growth” in the 2025 financial year, but investors had evidently hoped for more.
