Treasury Wine Estates is benefitting from strong Chinese demand
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Treasury Wine Estates is benefitting from strong Chinese demand

Australian wine producer Treasury Wine Estates got a bonus this week that sent its share price up by 5.8% - the most in eleven months! That bonus came in the form of an announcement from Wine Australia (the country’s relevant industry group), which said that Australian wine exports grew at their fastest rate in fifteen years last year, thanks to strong demand from China.

Treasury Wine Estates’ share price has risen 12% so far this year

graph 2507 treasury wine estates

SOURCE: Yahoo Finance

According to Wine Australia, wine exports from the country grew by 20% to $2.76 billion in the year ending June 2018. Driving this performance was exceptionally strong demand from Chinese drinkers, with exports rising by 55% against the previous year. Of the entire $2.76 billion exports, a full $1.12 billion went to China.

This is great news for investors, who were panicked in May when the company warned about customs delays at Chinese ports. Adam Fleck, a Morningstar analyst, is of the opinion that these worries are a temporary concern: “Treasury is benefiting from the China growth opportunity and more widely the opportunity in other Asian markets. There have been reports of some customs delays in China but over the medium-to-long term Treasury should get past these issues.”

Treasury Wine Estates has benefitted in recent months from strong Chinese demand – and this data demonstrates that, trade worries aside, the trend is continuing. The Wine Australia report said: “Nearly all regions that Australia exports wine to increased in value in the past 12 months, with north-east Asia having the standout performance, growing by 51 per cent to $1.2bn.”

Disclosure

Dominion holds Treasury Wine Estates in its Global Trends Luxury Fund.


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