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A2 Milk share price tumbles on China export concerns

The A2 Milk Company Ltd (ASX: A2M) share price is on course to finish the week with a day in the red.

At one stage on Friday the infant formula and dairy company’s shares were down over 4% to $12.20.

They have since recovered a touch but are still down over 3% at $12.33 at the time of writing.

Why is the a2 Milk share price under pressure today?

With no news out of the company or broker notes that I’m aware of, it looks as though the catalyst for this selling has been reports that New Zealand exporters are facing delays at Chinese ports.

According to the NZ Herald, New Zealand’s biggest seafood exporter Sanford has been impacted by these delays.

It is reportedly having issues getting salmon exports cleared through Chinese ports and authorities have not given a reason for the delay. There are concerns that this could be in retaliation to New Zealand’s recent Huawei 5G ban.

Though it is worth noting that dairy giant Fonterra hasn’t reported any issues.

A spokesman told the paper: “We enjoy a long-standing and constructive relationship with China and our many customers there. While of course we always keep a close watching brief on international trade developments, we have no cause for concern in China and aren’t experiencing any conditions in our export relationship which are out of the ordinary.”

What now?

There is speculation that the tensions between Australia and China is the reason that rival Bellamy’s Australia Ltd (ASX: BAL) has been waiting well over a year to be granted the necessary approval to sell its products in China, so I can completely understand why this may have spooked investors. Especially given how important the China market is to a2 Milk.

But while I think it will be worth keeping a close eye on the situation, I wouldn’t be selling shares in a panic just yet.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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