The share price of global wine giant Treasury Wine Estates Limited [ASX:TWE] was down by 2.49% at time of writing today, and appears to be on a downward trajectory.
Amidst the worsening trade relationship between China and Australia, its share price performance has been poor in the past week, sinking down by almost 10% last Wednesday.
Why is the share price going down?
Early last week, reports circulated that China was being swamped by a supply glut of the wine producer’s low-end products, due to Treasury forcing distributors to buy cheaper labels in addition to premium brands.
The Australian Financial Review has revealed that Clarke rescued almost $1 billion of market value in a hasty, unscheduled 51-minute call to analysts. Not only did he dismiss the reports, he insisted his strategy was on track, revealing the company’s core labels were growing in China, and warned the market about relying ‘on feedback from selected [Chinese] customers.’
What does the future hold for Treasury Wine Estates?
While Clarke has done his best to soothe the concerns of shareholders, he’s admitted that his staff are experiencing delays in getting product through China’s customs.
China has long been Australia’s biggest wine-export market, but if their custom rules continue to target Australian companies and products, this may change.
And while delays at customs have been reported as only a temporary measure, tensions continue to grow over China’s intention to wield influence over the Pacific region.
Various respected business leaders, including Reserve Bank Board member Graham Kraehe, have voiced their concerns and recommended Prime Minister Malcolm Turnbull’s involvement.
Before we drown ourselves in our best Penfolds in a panic, let’s hope the situation stabilises. It seems China knows how to kick us where it hurts.
Editor, Money Morning
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