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Baby Product Makers Gain on Child Policy Change: Hong Kong Mover

Infant Formula
A baby stays in a shopping cart as his mother selects infant formula in a supermarket in Haikou, Hainan province. Source: AFP/Getty Images

Infant formula makers, milk producers and sellers of other baby-related products surged in Hong Kong and China trading today after China said it will loosen its one-child policy.

Zhejiang Beingmate Technology Industry & Trade Co., the unit of China’s second-largest baby formula maker, rose 3.6 percent in Shenzhen. China Mengniu Dairy Co. and China Modern Dairy Holdings Ltd. climbed 4.8 percent and 5.3 percent percent respectively, while Yashili International Holdings Ltd. surged 9.7 percent in Hong Kong.

China is seeking to boost private investment and loosening its one-child policy as part of the biggest package of economic reforms since at least the 1990s. Couples can have two children if either parent is an only child, the Chinese Communist Party said in a statement on Nov. 15.

“This is going to boost near-term momentum for baby formula, baby food, diapers and medical care products manufacturers,” Jessie Guo, a Hong Kong-based analyst at Jefferies, said by phone today. “The impact on fundamentals are likely to be seen only in 2015. This policy will only result in 6 percent additional newborns. The benefit should be moderate.”

Under the current policy, couples are only allowed to have a second child if both parents are only children.

Milk powder company Biostime International Holdings Ltd. jumped 6.5 percent in Hong Kong. Goodbaby International Holdings Ltd., manufacturer of products such as strollers and child car-seats, gained rose 4.3 percent, while baby diaper maker Hengan International Group Co. rose 6.6 percent. The city’s benchmark Hang Seng Index rose 2.7 percent.

Market Share

Mead Johnson Nutrition Co. is ranked first in China’s milk-formula market with a 14 percent share last year and Hangzhou Beingmate Group, the parent of Zhejiang Beingmate, was No. 2 with 10 percent, according to researcher Euromonitor International. Danone was third with a 9.2 percent market share.

Infant formula makers Mead Johnson and Synutra International Inc. climbed 5 percent and 37 percent, respectively, in the U.S. on Nov. 15 after the Chinese government’s announcement.

China’s sixth national census in 2010 showed a fertility rate between 1.5 and 1.6, almost the same as some developed countries which are now plagued by aging populations.

Statistics from the National Health and Family Planning Commission show that China’s population of about 1.3 billion would be 400 million higher were it not for the policy, the official Xinhua News Agency reported.

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