On Monday the A2 Milk Company Ltd (ASX: A2M) share price tumbled almost 3% lower during a broad market selloff.
Although the market has rebounded higher this morning, the same cannot be said for the shares of the infant formula and fresh milk company.
In early trade the a2 Milk Company share price sank as much as 5% to $13.54.
Why is the a2 Milk Company share price sinking lower?
With no news out of the company or broker notes that I'm aware of, today's decline appears to be partly due to investors rotating out of growth shares to safe haven assets amid global trade war concerns.
This has been a positive for gold miners such as Newcrest Mining Limited (ASX: NCM) and Resolute Mining Limited (ASX: RSG) which have continued to push higher, but not so for the likes of a2 Milk Company, Bellamy's Australia Ltd (ASX: BAL), and Bubs Australia Ltd (ASX: BUB) which have all tumbled lower.
The latter three shares potentially have more to lose than most from a global trade war as they are focused on exporting to the massive China market.
Should a global trade war derail economic growth, it could lead to lower demand for infant formula products in China and stifle these fast-growing companies' growth.
This is particularly dangerous for growth shares like a2 Milk, Bellamy's, and Bubs as the market has already baked in significant future growth into their valuations. Any signs that these companies will fail to deliver on the market's expectations is likely to put pressure on their shares.
What now?
Whilst these declines are disappointing, I'm optimistic that a global trade war will be averted and a2 Milk Company will continue its impressive growth.
This could potentially make this week's pull back a buying opportunity for investors that are prepared to make a patient long-term investment.
