Recently, I’ve been looking at the Australian stock market and found that it’s actually overlooked by many people. Most people only think of Australia as a retirement destination when they invest in the Southern Hemisphere, but from an investment perspective, the changes in the Australian stock market over the past two years are pretty interesting.

First, let’s talk about the background. In 2024, the Australian index rose by nearly 13%. This performance may seem unremarkable, but the logic behind it is quite complex. Lithium mining stocks were hit badly because of excess capacity, falling by more than 30%, while at the same time, copper mining companies saw their share prices multiply by several times due to a surge in demand from AI data centers and electric vehicles. So it’s not that the overall Australian stock market is doing well—rather, structural opportunities are shifting.

Starting in 2025, the Australian government rolled out a hydrogen subsidy policy, providing 2 Australian dollars per kilogram. This policy has changed a lot. At the same time, the government also passed legislation requiring all coal-fired power plants to be phased out by 2030. This isn’t just a slogan—it’s a real investment direction with real money behind it. That means traditional mining companies are being forced to upgrade their technology, and the valuation logic for resource companies is being rewritten.

My own focus is on three things: where government subsidies are going, what raw materials new technologies need, and what resources major powers are competing for. Following this line of thinking, you can find plenty of opportunities in Australian stocks.

Fortescue is a company I find quite representative. They mainly mine iron ore, accounting for 80% of revenue, but at the same time they are doing hydrogen energy business through subsidiaries and plan to produce 15 million tons of green hydrogen annually by 2030. What’s interesting is that they use the money earned from mining to fund their hydrogen business. If they lose money, the original capital base will cover it; if they make profits, they become a new player in the hydrogen space. I think this business logic is pretty smart.

BHP and Rio Tinto are also worth watching. BHP controls the world’s largest copper mine, with capacity expanding to 1.4 million tons in 2025, and it signed a 10-year copper supply agreement with Tesla. Rio Tinto’s advantage is lower debt and a higher dividend yield of about 6%. Investors who care more about cash flow and dividends would likely prefer it.

Sandfire Resources is a cost killer in the copper sector. The copper grade in the Mozambique mine area reaches 6%, far higher than the global average, and their production cost is only 1.5 Australian dollars per pound—much cheaper than their peers. They also signed a supply agreement with Tesla, selling 50% of their capacity at the LME copper price plus a 10% premium. If you believe copper prices will rise, this company is a good leveraged tool.

In the financial sector, I’m looking at the Commonwealth Bank of Australia. This bank performs well in a high-interest environment, with an average dividend yield of 5.2%, and it has delivered dividend growth for 28 consecutive years. As rate cuts are further pushed through in 2026, pressure on mortgage lending should ease, while the bad loan ratio stays around 0.4%, which is relatively manageable.

CSL is in a technical monopoly position in healthcare. It controls 45% of global plasma collection stations, and its purification technology costs are 20% lower than those of competitors. Australia’s aging trend is clear, and the government’s health insurance budget increases year after year. Companies that can help the government reduce healthcare costs actually have a stable base of orders.

In retail, Wesfarmers is Australia’s largest retailer. 2024 itself was a favorable year for retail, with a recovery in consumer demand driving business growth. Compared with the high valuations of AI stocks, the “bubble” in retail stocks is relatively smaller. From a hedging perspective, retail stocks are worth paying attention to.

Zip is a buy-now-pay-later company. Over the past two years, it was hit the hardest by interest rate hikes, falling from a peak of 14 AUD to 0.25. But as the interest rate hike cycle ends, the business is starting to recover, and bad debts are also decreasing. The share price has now rebounded to 3.1, and with rate cuts beginning in 2025, there should still be significant room for growth.

Carmel Group is Australia’s largest real estate developer and also a REIT. It mainly invests in warehouses, logistics centers, and commercial real estate. It owns 65% of Australia’s top-tier logistics warehouse assets, and giants like Amazon and Coles are lining up to sign long-term contracts. With dividend growth for 12 consecutive years, an occupancy rate of 98%, this kind of stability is rare in the real estate industry.

I see three advantages of investing in Australian stocks. First, long-term returns are stable. From 1990 to this year, the total return has reached 11.8%, with an average dividend yield of 4%, making it very suitable for long-term holding. Second, they are relatively stable. With geopolitical risks rising worldwide, Australia is one of the most politically and economically stable countries globally, and there’s a trend of capital shifting into Australia. Third, there are tax advantages. Australia and Taiwan have a tax treaty, and the dividend withholding tax rate is only 10% to 15%, far lower than the 30% in the US.

Looking ahead to 2026, the opportunities in Australian stocks should lie in valuation re-pricing driven by the energy transition. After upgrading technology, traditional mining companies can gain new valuation premiums. AI’s demand for copper will continue to push up the profits of related companies, and a rate-cut environment will trigger a new round of asset rotation. Instead of trying to predict market direction, it’s better to build your investment strategy based on these established trends. Australian stocks are worth paying more attention to.