Are your blue-chip stocks hiding a China problem?

Investors in Fortescue Metals Group (FMG) are among the most exposed on the ASX to a single country, with almost 90% of the miner's revenue coming from China alone, according to data compiled by Morningstar.

A new searchable database, available here, breaks down the revenue of more than 700 ASX-listed companies by country or region of origin, revealing the most important markets for some of Australia’s most popular stocks.

Many ASX investors may still be surprised to learn just how global a seemingly local portfolio can turn out to be.

Miners closely tied to Chinese market

Given China's reliance on Australian iron ore, it's no surprise that the big three producers - Fortescue, Rio Tinto (RIO) and BHP (BHP) - generate a large portion of their revenue from China. 

However, investors may not realise just how exposed they are, with more than half of all revenue for these miners coming from China.

Fortescue Metals Group garners the largest proportion of its revenue from China—at a whopping 88%—compared to 54% and 56%, respectively, for Rio Tinto and BHP.

Morningstar equity research analyst Jon Mills says Fortescue’s heavy reliance on the Chinese market is due to its position as a single-resource producer. 

“Despite its nascent efforts in green energy, Fortescue currently only produces iron ore so it's much more tied to China, which accounts for around 70% of global seaborne iron ore demand," he says.

"This compares to more diversified miners like BHP and Rio Tinto, which along with iron ore also produce other metals like copper (and in Rio's case, aluminium) which are less directly dependent on Chinese demand."

ASX large cap miner Mineral Resources (MIN) is less exposed to China, sourcing around a quarter of its revenue from the nation, with the majority (56%) of earnings coming from neighboring Singapore.

Meanwhile, Japan stands out as a key market for many of the ASX’s larger-cap coal producers, with Whitehaven Coal (WHC) and New Hope Corp (NHC) both deriving most of their revenue from the major importing nation. Japan is also a key market for gold producer Newcrest Mining (NCM), comprising 35% of its revenue compared to 38% from the Australian market.

It's worth noting that a well-diversified portfolio will help mitigate key-nation risks, such as China diversifying away from Australia or a trade-relationship breakdown. Knowing where your investments source their revenue from is a valuable tool in ensuring you're not overly exposed. 

But the resources and energy sectors aren’t the only segment of the Australian market to be heavily tied to a single overseas source.

ASX Health tech skews to US market

While Asia Pacific stands out as the major market for ASX mining and energy blue chips, a similar trend is also apparent between popular ASX health tech stocks and the United States.

Large-cap biotech plays CSL (CSL), Cochlear (COH) and ResMed (RMD), which have all tracked strong year-to-date performances on the ASX, all derive close to half of their revenue from the US.

Other ASX 50 healthcare stocks, Fisher & Paykel Healthcare (FPH) and Sonic Healthcare (SHL) also pull major segments of their revenue from the US, at 43% and 23%, respectively.

Hospital services multinational Ramsay Health Care (RHC) is the only ASX 50 healthcare stock which doesn’t source a major chunk of its revenue from the US, instead relying on the European market, which contributed around 60% of its revenue in the most recent annual report.

The US remains a vital market across the ASX technology stocks with fintech giant Block Inc (SQ2) generating 93.1% of revenue from the nation, even after its purchase of Australia-founded Afterpay, which finalised early last year. 

Conversely, the remaining technology stocks on the ASX 50, logistics platform provider Wisetech Global (WTC) and accounting software developer Xero (XRO), have a comparatively smaller presence in the US, instead sourcing the majority of their revenue from Europe and ANZ, respectively.

The US appears a key market for some of Australia’s largest financial services firms, with the region contributing more than a third (36%) of revenue for QBE Insurance Group (QBE) and more than half (57%) of revenue for Melbourne-founded financial admin platform Computershare (CPU).  

US and Asia Pacific dominate ASX-listed revenue

Taking a broad look at where this sample of ASX companies source their revenue from reveals a few common trends and notable blank spots.

Excluding Australia, the Asia Pacific region dominates with around 500 of the 700+ companies in the database earning at least a portion of their revenue from the region during the past full year reporting period.

While China and mainland Asia accounted for a large proportion of this, the presence of ASX companies in countries such as New Zealand, Singapore and Japan also account for a significant proportion.

The next most popular revenue region among ASX listers is the US, closely followed by Europe, with the number of companies disclosing revenue from South America, Africa, the Middle East and the former Soviet Union trailing much further behind.

Looking at the revenue breakdown among the ASX’s top 50 companies by market cap, global miner AngloGold Ashanti (AGG) is the only company surveyed to derive the majority of its revenue from outside Asia Pacific or the US.

How does the revenue from you ASX investments stack up geographically? Click here to access and search the table.