China tariff move could benefit Aussie winemakers


This week, the Chinese Ministry of Commerce announced a proposal to remove tariffs on Australian wine exports.

If approved, this would be a massive game changer for Australia's wine industry, as it would benefit Australian winemakers and the industries that support them.

Rather than discussing the nature of the proposal, let's look at who will benefit the most from this.

china could remove tariff on australian wine

One such company is Treasury Wine Estate (TWE). It is a global wine company with consumers in over 70 countries, including China.

In fact, what's exciting for Treasury Wines is that before the tariffs were introduced in 2020, its profits mainly came from the Chinese market. Removing the tariffs would significantly increase the company's profitability and greatly impact the share price.

That said, we do need to consider the bigger picture, so playing devil's advocate, I see the economic risks China has been facing, which is concerning for future wine sales in China.

It has high youth unemployment and financial issues in some of its largest institutions, as we have seen in the property sector in recent years. So I wonder whether the people of China would be in a hurry to buy their favourite bottle of Penfolds.

Since Treasury Wines reported last month, the share price has risen over 9% and looks a little stretched.

Given this, I expect the stock to pull back in the short term, although it may trade sideways and consolidate until the final decision on the tariff is made.

If the Chinese Government approves the tariffs being cut, I recommend watching this stock closely, as a run back up to $14.80 could well be on the cards.

What are the best and worst-performing sectors this week?

The best-performing sectors include Information Technology, up over 0.5%, followed by Utilities and Real Estate, which are both slightly in positive territory.

The worst-performing sectors include Energy and Financials, down over 3%, followed by Industrials, down just under 2%.

The best-performing stocks in the ASX top 100 include Block, which is up over 11%, followed by Bellevue Gold, which is up over 6%, and Metcash, which is up over 5%.

The worst-performing stocks include National Australia Bank, Westpac, REA Group, CBA, and Domino's Pizza, which are all down over 4%.

What's next for the Australian stock market?

Sellers have been active this week, pushing the All-Ordinaries index down just under 2% to below 8,000 points.

I believe the market has fallen after it was announced last week that we are experiencing weaker GDP and lower building approval numbers, which may have given sellers a reason to enter the market. It could also be that the market is just doing what it normally does.

If you remember, I mentioned last week that I anticipated the All-Ordinaries index would fall this week and next.

I also shared that my target for the fall was likely to be 7800 or 7700 points, as the market needed to take a breather from the strong run-up since February this year.

While 7800 to 7700 points are still the levels to watch, I also see support at the 7900 level, so don't be surprised if the market finds support at this level before rising again.

I am quite positive about our market and anticipate that March will finish in positive territory. From a seasonal perspective, based on analysing the performance of the All-Ordinaries index over the last 40 years, March averages a positive return of 0.65%.

Last week, I also emphasised the importance of patience and not getting caught up in FOMO.

With the current pullback underway and March statistically finishing in positive territory, this provides an opportunity to set yourself up to buy stocks to capture some great profits this year for those who understand the value of how.

Therefore, if you haven't begun already, I urge you to start researching stocks to take full advantage of the next move up.

On a side note, the RBA will announce its decision on interest rates next week, which is different from the normal first Tuesday of the month routine. So be prepared for some possible extra volatility on the market early next week.

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Dale Gillham is chief investment analyst at Wealth Within Limited (AFSL 226347). He also serves as the head trainer at the Wealth Within Institute (RTO 21917). He has more than three decades of experience in the investment industry, and is the author of How to Beat the Managed Funds by 20%, Dale's qualifications include an Advanced Diploma and a Diploma of Share Trading and Investment. He co-hosts the Talking Wealth Podcast, and his work has appeared in The Australian Financial Review, New York Business Journal, Wall Street Select and more.