China focused consumer stocks recover

Shares in Some food, dairy and vitamin producers that sell into China have partly recovered after being hit by changes to China’s tax policy on cross-border e-commerce retail sales.


Investors may have over-reacted when selling off China focused consumer stocks, including vitamins supplier Blackmores and children’s food and formula supplier Bellamy’s Australia, HC Securities chief executive and client advisor Mark Lennox said.

“The longer term trend is probably still positive,” he said.

Under changes made to China’s e-commerce tax laws on April 8, retail goods bought online from overseas will no longer be treated as personal postal goods but as imported goods, which are subject to tariffs, import VAT and consumption tax.

The changes also include a “positive list” which lists products that can be sold in China through cross-border e-commerce in China’s free-trade zones.

The tax policy aims to create a level playing field for e-commerce platforms and traditional retailers and importers.

Mr Lennox said demand for products such as milk, infant formula and vitamins was still going to be strong in China given its large and growing middle class, and the end to the country’s one child policy.

Shares in Blackmores rose 77 cents to $165.77 on Wednesday, while Bellamy’s Australia gained 49 cents, or 5.5 per cent, to $9.37.

Dairy producer Bega Cheese gained 10 cents to $5.63, milk supplier Murray Goulburn’s unit trust rose two cents to $2.03, and A2 Milk was up 2.5 cents at $1.62.

But Freedom Foods continued its fall and was down 11 cents at $3.29.

Some of the Australian companies impacted by the changes in China expect no significant impact on their business.

They say they can shift the distribution of affected goods to other sales channels such as traditional retail outlets and domestic e-commerce channels in China.

Vitamins and health foods supplier Vitaco, whose shares fell 10 per cent on Tuesday, said on Wednesday that its Healtheries Goats Milk Powder was the company’s only product to be impacted by the changes, and sales of the product through the affected sales channel were not material.

Vitaco shares gained eight cents, or 5.3 per cent, to $1.58 on Wednesday.

Australian Dairy Farms Group, which expects to soon complete the acquisition of Camperdown Dairy Company, said it expects no adverse impact on CDC’s exports to China from the regulatory changes.

Its shares lifted three cents, or 11.3 per cent, to 29.5 cents.