A2 Milk (ASX:A2M) share price sours amid international student uncertainty

The A2 Milk (ASX: A2M) share price is turning sour today as reports emerge Australia may not accept international students any time soon.

| More on:
falling milk asx share price represented by frowning woman tasting sour milk

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The A2 Milk Company Ltd (ASX: A2M) share price is turning sour today. At the time of writing, shares in the New Zealand dairy company are trading for $8.23 – down 0.72%. By comparison, the S&P/ASX 200 Index (ASX: XJO) is 0.3% higher.

Over the last year, the A2 Milk share price has fallen by an astounding 53%.

While daily share price movements can be influenced by a myriad of factors, one possible reason behind today's A2 Milk doldrums could be recent developments surrounding international student arrivals into Australia.

Let's take a closer look at recent reports and why they could be negatively impacting the A2 Milk share price.

Australia may not see international students return soon

According to a report in yesterday's The Australian, as a result of Australia's delayed vaccine rollout for COVID-19, the country appears unlikely to reach herd immunity by the end of 2021 and therefore not open its borders to international students. Just last week, Prime Minister Scott Morrison said a general border opening was not on the cards in the near term.

There were hopes international students could come back to Australia before 2022, and before the borders were open to all. The New South Wales Government proposed a program to allow international students to return to the country and isolate themselves separately from the hotel quarantine program.

The state government stressed international students are "vital" for the "education sector and the economy more broadly" and began seeking external expressions of interest for the management of international student arrivals, as reported by The Guardian.

Ongoing issues with Australia's vaccine rollout may have put those hopes on ice.

What does this have to do with the A2 Milk share price?

Before the pandemic, the biggest 'cash cow' for A2 Milk was its infant formula. In FY19, infant formula compromised 81.5% of all revenue. The largest market for A2 Milk's infant formula was the daigou market.

Daigou is a term that refers to a market of customers who buy products overseas (such as in Australia) and then sell and ship them to end-users in China. These entrepreneurs are usually, but not always, from the People's Republic. Popular daigou products in Australia include Blackmores Limited (ASX: BKL) vitamins and the aforementioned infant formula.

ASX investors do not expect the international border to open for some time. An analysis by Deloitte Access Economics says the border will not open fully until at least 2024. There was hope, however, an exception could be made for international students.

The reason the A2 Milk share price could be impacted by the return of international students to Australia is that a large portion of these students come from mainland China.

According to the Department of Education, in 2019 (pre-pandemic) 212,000 international students in Australia were from China, representing the single largest nationality bloc. In fact, this number was greater than those of the next three nationalities combined.

For further context, in FY19, 1.4 million tourists arrived in Australia from China. While the Chinese international student number is obviously much smaller, it still represents around one-sixth of total Chinese visitors to Australia.

The return of international students has the potential to reactivate the daigou channel in Australia. If the latest reports are to be believed, however, international student arrivals are still some way off. This could be partially responsible for the continued slump in the A2 Milk share price in the short term.

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk and Blackmores Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Consumer Staples & Discretionary Shares

a smiling woman looks towards the camera as she tends to the engine under the lifted bonnet of her car.
Earnings Results

Bapcor share price resilient following record half year revenues

ASX 200 investors are mulling over Bapcor’s half year results today.

Read more »

Close up of a sad young woman reading about declining share price on her phone.
Earnings Results

Accent share price sinks 8% on earnings slump and dividend cut

This footwear retailer's earnings took a dive during the first half.

Read more »

A photo of a young couple who are purchasing fruits and vegetables at a market shop.
Consumer Staples & Discretionary Shares

ASX earnings: What can we expect from Coles shares next week?

Will Coles' next earnings be as dramatic as Woolies' were?

Read more »

Two race cars on a track at sunset.
Earnings Results

This ASX 300 stock just hit a new 52-week high on strong profit growth

This retail stock is defying inflation and booking 25% profit growth in the first half.

Read more »

Woman smiles at camera at she buys greens from the supermarket.
Broker Notes

Are Woolworths shares dirt cheap following the selloff?

Is now the time to pounce? Let's see what one leading broker thinks.

Read more »

Two men in a bar looking uncertain as they hold a betting slip and watch TV.
Earnings Results

Tabcorp share price tumbles 13% on half-yearly earnings loss

The wagering and gaming company has hit a new 52-week low.

Read more »

A young man in a retail shop pays for his purchases using a card
Consumer Staples & Discretionary Shares

Here are 3 ASX retail shares moving up to 19% on half-year results today

Here's how the market is reacting to these results releases today.

Read more »

High fashion look. glamor closeup portrait of beautiful sexy stylish Caucasian young woman model with bright makeup, with red lips, with perfect clean skin.
Earnings Results

Lovisa share price soars after opening 74 new stores in first half

The market not worried this time about a decrease in comparable store sales, which bought the retail stock down in…

Read more »