ASX companies are taking advantage of US withdrawal from Chinese manufacturing – and that’s creating opportunities for investors. Perpetual’s head of equities Vince Pezzullo explains
- US withdrawing from Chinese manufacturing
- Nick Scali, Premier Investments set to take up spare capacity
- Find out about Perpetual Equity Investment Company (ASX:PIC)
ASX-listed companies are placed to benefit from US trade wars as significant excess manufacturing capacity starts to build in China, says Perpetual’s head of Australian equities, Vince Pezzullo.
US companies are withdrawing manufacturing and sourcing activity from China as President Donald Trump’s tariff attacks seek to drive business activity back to the US.
Pezzullo says the resulting spare capacity across China’s factories means Australian businesses have a unique opportunity to renegotiate contracts and build new supply relationships.
“Every US corporate that’s got manufacturing or sourcing has to exit China and relocate their operations or source outside China — but Australia doesn’t have that problem,” says Pezzullo, speaking at the Lonsec Symposium 2025.
“So, we're trying to flip that and think: what Australian companies could benefit from the fact that there's now significant excess capacity in China?
Pezzullo says ASX-listed companies like furniture maker Nick Scali and Solomon Lew’s Premier Investments — the owner of Peter Alexander and Smiggle stores — are emerging as winners from the trade shake-up.
“We called up Sol and asked, ‘what are you guys doing?’ He said we’re up there and we’re renegotiating every contract we’ve got to get better terms.
“They are already doing gross margins of 60 per cent — and he thinks he’s going to get more out them.
“Same for Nick Scali. We loaded into it during the sell off. Nick Scali also does 60 per cent gross margin and they’ve got great direct sourcing.”
Pezzullo is the portfolio manager of Perpetual Equity Investment Company (ASX:PIC), which is a listed investment company that invests in a diversified portfolio of high quality Australian and global listed securities.
“Everyone was expecting a pretty deep recession. That was when we went looking for those sorts of names that can do direct sourcing into China that have a supply chain straight into China.
“There’s a couple of names in Australia which sold off ... there was a one-week period where things fell about 14 to 15 per cent.”
He says outside Australia, the UK is also offering opportunities to take advantage of market instability.
“If I was going to put $1 in any market at the moment, it would be the UK.
“People in the UK love death riding their own economy. They really hate themselves for some reason. But when you look at the statistics of the underlying economy, there's been a significant deleveraging of the UK consumer. They've gone from net debt to actually having the cash in the bank.
“For Nick Scali, which is trying to grow into that market, they'll make at lot of money just from that cyclical up tick.”
Pezzullo says spent time with London Stock Exchange-listed kitchen trade supplier Howdens in a recent UK visit.
“A great business, high returning, and very exposed to the UK. They're a one stop shop that do kitchens for from GBP2000 up to GBP15,000, and they're quite dominant.
“They were saying despite high rates and the negativity, they were still growing at 6 to 10 per cent a year. But the shares derated by 25 to 30 per cent.
“We like a bit of cyclicality in our portfolio, when you get it at the right price. We're quite patient and we have to wait for that moment — and that was the moment, you had to get set about a couple weeks ago, and that should set your performance up going forward.”
About Vince Pezzullo and Perpetual Equity Investment Company (ASX:PIC)
Vince is Perpetual’s head of equities and portfolio manager of Perpetual Equity Investment Company (ASX:PIC).
Vince has more than 20 years of experience in financial services including global experience as an analyst and portfolio manager.
Perpetual Equity Investment Company Limited (ASX:PIC) is a listed investment company which provides a simple and transparent way to invest in a diversified portfolio of high quality Australian and global listed securities.
PIC is managed to provide investors with an income stream and long-term capital growth.
Perpetual is a pioneer in Australian quality and value investing, with a heritage dating back to 1886.
We have a track record of contributing value through “active ownership” and deep research.
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