China throws a spanner in the works of baby formula names
Stock
A2 Milk (A2M) $13.47 as at 05/06/2019
Bellamy’s (BAL) $7.73 as at 05/06/2019
Bubs Aust (BUB) $1.09 as at 05/06/2019
Wattle Health Aus (WHA) $0.55 as at 05/06/2019
Event
Some wild swings are being seen in the listed companies selling baby formula into China over the past few sessions after the country announced a target to become 60% self-sufficient in the product. The announcement signals a turning point in what has been a lucrative strategy for the names with the message from China’s National Development and Reform Commission pinpointing the importance of the product as it starts the process of assisting domestic producers.
Although no policy has been arranged, nor any meaningful inroads into how China plans to get to 60%, the case has clearly been made for more protection in the industry in China. The report did specifically mention high quality part of the market such as organic formula – a product Bellamy’s specifically had invested heavily in.
Previous intervention by China into retail products has seen some shift in demand, although the government has also been willing to work with suppliers that are looking to invest in the country.
A2 Milk (A2M) Chart
Market Matters Take/Outlook
