The Comvita Ltd [NZX:CVT] share price has dived by over 3% today. This coincides with fresh talk about new cross-border e-commerce rules that threaten to make it harder for Kiwi producers looking to export their products into China.
Comvita — founded in 1974 — is New Zealand’s largest supplier of UMF Manuka honey. A popular fixture on grocery shelves, the company is well-known for its natural and organic image.
Comvita’s share price is currently sitting at $6.20 at the time of writing. It has a market capitalisation of $282.55m.
Why has the Comvita share price fallen?
Comvita has depended on cross-border e-commerce (CBEC) to make inroads into the Chinese market. In particular, the informal ‘daigou’ platform is a favoured pathway.
However, consumer complaints about the quality of CBEC products has encouraged Chinese regulatory officials to tighten the screws when it comes to import controls.
The passage of a new law on 31 August 2017 is anticipated to come into force on 1 January 2019.
While Manuka honey exporters should remain unaffected by these new import controls, there remains a level of general anxiety among Kiwi producers at large.
This has filtered down to Comvita’s share price, which dropped from $6.40 to $6.20 today.
Where could Comvita go from here?
New Zealand trade officials are currently monitoring the situation. It is still unclear at this point whether the new Chinese law is purely about enforcing quality control or is part of wider legislation intended to clamp on online platforms like ‘daigou’.
However, once the legal situation stabilises and the market attains more certainty, we anticipate a recovery in Comvita’s share price, as well as an upward trajectory.
Editor, Money Morning New Zealand