Why did Comvita’s Share Price Plunge by 3.13% Today?

 

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.

 

Regards,

Taylor Kee,
Editor, Money Morning New Zealand

PS: New Zealand has already benefited as China lifted nearly a billion people out of extreme poverty. Now it’s set to boom again as middle-class incomes continue to rise. In our latest FREE research report, we identify three investments we believe could be readying to soar on the back of China’s rise. Download your free report here with all the details.

 

 

 


Taylor Kee is the lead Editor at Money Morning NZ. With a background in the financial publishing industry, Taylor knows how simple, yet difficult investing can be. He has worked with a range of assets classes, and with some of the world’s most thought-provoking financial writers, including Bill Bonner, Dan Denning, Doug Casey, and more. But he’s found his niche in macroeconomics and the excitement of technology investments. And Taylor is looking forward to the opportunity to share his thoughts on where New Zealand’s economy is going next and the opportunities it presents. Taylor shares these ideas with Money Morning NZ readers each day.


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