In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to start the week on a very positive note. At the time of writing the benchmark index is up 1.1% to 5,451.6 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price is down 3% to $27.13. This is despite there being no news out of the medical device company. However, with its shares up almost 30% year to date, some investors may have decided to take a bit of profit off the table. Fisher & Paykel Healthcare’s shares have been strong performers this year thanks to increasing demand for its ventilators.

The Graincorp Ltd (ASX: GNC) share price is down 4% to $3.45. This follows news that China is threatening to slap an 80% import tax on Australian barley. China alleges that the Australian government is subsidising farmers and allowing them to dump barley into China at cheaper prices than those offered by Chinese farmers.

The Polynovo Ltd (ASX: PNV) share price is down 1.5% to $2.51. This decline appears to be down to profit taking. After all, the medical device company’s shares were on fire last week and recorded a gain of 28% over the period. This followed Polynovo’s appearance at the Macquarie Group Ltd (ASX: MQG) Investor virtual conference. Management spoke positively about the $7.5 billion market opportunity for its NovoSorb product.

The SEEK Limited (ASX: SEK) share price is 1.5% lower at $17.18. At the end of last week analysts at Morgans downgraded SEEK’s shares to a reduce rating with a $15.55 price target. It believes that job listing volumes will be lower for longer and feels the market isn’t factoring this into its current share price.

More reading

• Indonesian market boom for 6 ASX shares
• These ASX shares booked the biggest gains last week
• These ASX 200 shares are up over 1,000% in just 3 years
• ASX 200 Weekly Wrap: New ASX bull run continues
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended SEEK Limited. 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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The share prices of a number of ASX companies that were hit hardest by the coronavirus lockdown leapt higher on Friday afternoon after the Federal Government laid out its plans for the gradual easing of social restrictions. Travel agent Flight Centre Travel Group Limited (ASX: FLT) jumped over 8% to $10.76, while online flight comparison website Webjet Limited (ASX: WEB) ended the day up 9% at $2.93. 

Friday’s performance is little consolation to long-term shareholders, with both ASX tourism shares still well short of their pre-coronavirus highs. Flight Centre had begun the year hovering around $40 a share and is still down close to 75% year-to-date. Webjet has seen a similar percentage decline in its share price so far in 2020, after it opened the year trading at roughly $10, although it has rocketed out of the gates this morning and is currently up another 11.95% on Friday’s close.

However, the short-term rise does show that in investors are seeing glimmers of hope for both companies in the Australian Government’s “3 Step Framework for a COVIDSafe Australia”. While the future for global travel is still uncertain, the government has laid out a roadmap towards states reopening their borders for domestic recreational travel in the coming months. There are even whispers of a trans-Tasman bubble for some international travel between Australia and New Zealand by summer.

These are the first positive signs for a tourism industry which has been effectively destroyed by the coronavirus pandemic. Apart from some repatriation services, just about all international flights have been grounded as countries lock down their borders to halt the spread of the virus. Domestic tourism has all but ceased too, with states similarly closing their borders to outsiders and most people urged to stay indoors. An entire school holiday period has come and gone with most families confined to their houses.

Should you invest in ASX tourism shares?

Despite their recent gains, the share prices of both Webjet and Flight Centre are trading at historic lows. But the 2 companies are now operating in an economic environment which is fundamentally – and potentially even permanently – changed by the coronavirus. And while these most recent announcements by the government could lay the foundations for a slow path back to profitability for the failing tourism industry, business-as-usual is still a long way off.

Unfortunately for Webjet, it has invested heavily in expanded its international operations. In its first half FY20 results, Webjet reported a 43% jump in earnings before interest, tax, depreciation and amortisation (EBITDA) to $86.3 million. But over 60% of group EBITDA was contributed by its WebBeds business, which provides international accommodation booking services. Domestic bookings were actually flat for the half.

It could easily be argued that in a new “COVIDSafe” economy where people are only able to travel domestically – or at best, to New Zealand – local travel bookings will increase. But whether they can increase to such a degree that they can offset the enormous losses in higher margin international bookings is very doubtful.

The steps back towards some degree of normality flagged by the Federal Government are a welcome sign for an economy crippled by coronavirus. But with so much uncertainty still on the horizon, it might be just too risky to think about investing in the tourism sector right now.

However, it’s also true that at these bargain-basement prices both companies offer significant upside potential for early movers. So, it will still definitely be worth watching Webjet and Flight Centre over the coming months as social restrictions ease to get a sense of what consumer behaviour will be like in our new “Covidsafe” economy.

More reading

• Market close: ASX 200 ends 0.5% higher
• Federal Government outlines 3-step plan to reopening Australia
• Is this the next major ASX financial institution to raise capital?
• Is the Flight Centre share price in the buy zone?
• Is it time to buy ASX travel shares again?

Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. 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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Last week, Trade Minister Simon Birmingham announced the Comprehensive Economic Partnership Deal between Australia exporters and Indonesia markets takes effect from 5 July 2020. This could not have come at a better time given the economic impacts from COVID-19.

Australia’s balance of payments surged to a record $10.6 billion in March. The largest in recorded history. This is due to strong export demand for iron ore and surging demand for gold. The lowest Australian dollar for almost 2 decades has also helped increase revenues.

Lastly, we have had the largest sudden fall in imports in our nation’s history. The deal will help Australian manufacturers to increase market share in our closest neighbour, extending our national trade surplus.

I believe the following ASX shares are the most likely to benefit immediately.

Targeted Indonesian market

GrainCorp Ltd (ASX: GNC) will see tariff-free exports of up to 500,000 tonnes of wheat, barley and sorghum to Indonesia each year. This will grow by 5% annually. This defensive share has become more important to our national economy during the pandemic than at any time in its history.

GrainCorp has rebuilt itself over the past 3 years after exports to Indonesia collapsed by over 70% amid drought and intense competition. This provides an opportunity to further rebuild markets into what used to be Australia’s largest wheat customer.

Other agricultural companies to benefit in this space include those in the red meat sector of beef and sheep. In this sector, tariffs will be immediately halved to 2.5% and eliminated totally over 5 years. This is likely to provide tangible benefits for Australian Agricultural Company Ltd (ASX: AAC) as well as Elders Ltd (ASX: ELD).

Dairy producers will also see tariffs eventually removed from their products. This creates an opportunity for market leaders like A2 Milk Company Ltd (ASX: A2M), as well as rising challengers such as Synlait Milk Ltd (ASX: SM1).

Steel producers will have annual tariff-free access for 250,000 tonnes of rolled steel coil, exposing additional market share for companies such as BlueScope Steel Limited (ASX: BSL).

Foolish takeaway

Our nation’s ability to maintain an overall trade surplus is going to be crucial in the coming months and years. Many countries are set to see dramatic declines in economic activity as a result of the COVID-19 pandemic.

For Australia, free trade deals such as these providing increased access to Indonesian markets are likely to be the difference between a crushing depression and a swift path back to prosperity. 

More reading

• Where to invest $20,000 into ASX shares for strong long term returns
• These ASX shares booked the biggest gains last week
• 5 things to watch on the ASX 200 on Monday
• 3 of the best ASX 200 shares to buy and hold for 10 years
• How to make a $1 million share portfolio by investing $1,000 a month

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Elders Limited. 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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