Why has the Treasury Wine share price jumped 5% in a week?

The Treasury Wine Estates Ltd (ASX: TWE) share price has done well, rising by around 5% over the past week.

That compares to the S&P/ASX 200 Index (ASX: XJO), which only went up by around 2%, so it has materially outperformed.

The winemaker hasn’t announced anything recently. But, it may be what’s going on elsewhere in the world that could be helping boost the Treasury Wine Estates share price.

Thawing of relations

The last few years have been difficult for TWE, as China put tariffs on the Australian wine sector. Treasury Wine Estates saw a sizeable chunk of its earnings dry up. The company has been hard at work finding new markets to sell its wine, and (in my opinion) been largely successful with this strategy.

However, since the change of Australian Government, there has been a slow but steady shift in communication between the two countries.

It culminated earlier this week when Prime Minister Albanese met with China’s leader, Xi Jinping. This was the first meeting between leaders of the two countries in years.

As reported by the ABC, Albanese said ahead of the meeting that even having a meeting with Australia’s largest trading partner was a “successful outcome”.

The meeting was reportedly 32 minutes long, which was 12 minutes longer than originally scheduled.

The ABC reported that Xi said China and Australia should “improve, maintain, and develop” the relationship, which has “encountered some difficulties” in the past few years. That sounds like a promising thing for the TWE share price, right?

Xi also said that “China-Australia relations have long been at the forefront of China’s relations with developed countries, and they deserve to be cherished by us”.

Albanese seemed pleased with the meeting, calling the talks “warm” and “constructive”. The PM also said that both countries took an important step to “moving forward”.

The ABC quoted Albanese saying:

There are many steps, of course, that we are yet to take… we will cooperate where we can, [and] disagree where we must act in the national interest.

At this stage, there was no official announcement on wine tariffs, or any of the commodities that China has put tariffs on.

The media outlet suggested that there are conditions – that China “wants to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and wants Australia to continue its one-China policy.” Also, the ABC reported that Xi wants Australia to see China as a partner, not a rival.

Foolish takeaway

Any progress that Australia can make that would help the wine industry may seemingly be a benefit for the Treasury Wine Estates share price.

Any change may take a while, and if tariffs are changed it may only be a reduction. We’ll have to see what happens next. Regardless, the business is growing in other markets to make up for the loss of Chinese sales.

The TWE share price is still down more than 20% from the pre-COVID price.

The post Why has the Treasury Wine share price jumped 5% in a week? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Treasury Wine Estates Limited. 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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