Wine Tariffs Set to End: Which ASX Stocks will Benefit?

Dale Gillham, Chief Analyst and Head Trainer of Wealth Within

By Dale Gillham |

Last week, the Chinese Ministry of Commerce proposed removing tariffs on Australian wine exports. If approved, this would be a massive game changer for Australia's wine industry, benefiting Australian winemakers and the industries that support them. Rather than discussing the nature of the proposal, let’s look at which ASX stocks will benefit the most.

Is it time to buy Treasury Wine Estates?

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 per cent 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 tariffs 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 were the best and worst-performing sectors last week?

The best-performing sectors included Utilities, up 2.16 per cent followed by Real Estate, up 1.95 per cent and Energy, up 1.02 per cent. The worst-performing sectors included Industrials, down 1.47 per cent followed by Financials, down 1.02 per cent and Communications Services, down 0.916 per cent.

The best-performing stocks in the ASX top 100 were Bellevue Gold, up 8.04 per cent, Block Inc, up 6.09 per cent, and Charter Hall, up 3.54 per cent. The worst-performing stocks were Whitehaven Coal, down 8.97 per cent, Fortescue Metals, down 7.7 per cent, and IGO Limited, down 5.5 per cent.

What's next for the Australian stock market?

Sellers were active early last week, pushing the All-Ordinaries index down around 2 per cent to below 8,000 points. While it steadied somewhat for the remainder of the week, it eventually closed down 2.24 per cent. I believe the market fell because of the recent announcement that we are experiencing weaker GDP and lower building approval numbers, which may have given sellers a reason to enter the market. However, the market could also be just doing what it normally does.

If you remember, I mentioned in my last report that I anticipated the All-Ordinaries index would fall last week or this week. I also shared that my target for the fall was likely to be 7,800 or 7,700 points, as the market needed to take a breather from the strong run-up since February this year. The low of 7,848 points from last week is at the top end of my target zone. While 7,800 to 7,700 points are still levels to watch, we do need to consider it may fall further. That said, don't be surprised if the market finds support around this current level and starts to rise 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 per cent. 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 on Tuesday, 19 March, which is different from the normal first Tuesday of the month routine. So be prepared for some possible extra volatility on the market this week.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.

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