How to play the Aussie news - several ways to profit

With a somewhat surprising resignation of the Australian Prime Minister, Kevin Rudd, and his replacement Julia Gillard stepping in, there are four potential way to play the news.

Recall, that Rudd didn't step down because of his hard and very vocal stance against cultural differences between Australians and Muslims, but because of his proposal to levy a 40% tax on natural resource companies. When it was first announced a couple of months ago, Australian nat resource companies and Aussie dollar took a beating.

With this proposal pretty much dead now and hopes that his new replacement will be a more reasonable with respect to this tax policy, I would be consider buying a few potential beneficiaries:

Rio Tinto (RTP)
BHP Billiton (BHP)
Peabody (BTU)
and FXA, a long bet on the Aussie Dollar that should benefit from it.


Now, keep in mind, this is a commodity based trade, and if USD bounces, it will pressure commodity producers. Secondly, after a pretty subdued commentary for the FED on the state of the economy yesterday, investors may stay away from anything that is leveraged to stronger economic growth. Lastly, there is no guarantee that the incoming PM will completely move away from this proposal, and although I believe the 40% tax is not going to fly, it may be replaced with a lower negotiated rate like 30-35%, which will still keep many natural resource companies reducing their exploration and production in Australia. So consider this points before buying.