China’s boost to Aussie retailers

SHARES in vitamin supplier Blackmores and dairy group A2 Milk have surged after China announced plans for new regulations governing products bought online.

Chinese premier Li Keqiang announced that a grace period that had previously been given to certain foreign consumer products sold through socalled cross-border e-commerce channels would end.

It would be replaced with new regulations to come into effect from January, Mr Li said.

That revelation was greeted by the market as a positive for Blackmores and A2 Milk because China’s government had made no announcement about extending the grace period beyond December.

Investors had feared that as the end of the year was nearing, the regulatory risk for the companies was increasing.

Shares in Blackmores, led by chief executive Richard Henfrey, rallied 5.9 per cent, or $7.43, on the development, closing at $133.40.

Shares in A2, led by chief executive Jayne Hrdlicka, also jumped 5.9 per cent, or 55¢, to $9.90.

Under the new Chinese policy, cosmetics, health food and infant formula sold through cross-border online channels would not need to comply with China’s domestic regulations.

The new rules also allow for an increase in the volume of individual purchases made through such channels that attract a lower tax rate for Chinese consumers.

“The rule changes are a meaningful positive for Blackmores, allowing all its products to continue to trade through (those channels) without requiring the difficult ‘blue hat’ registration for offline sales of vitamins in China,” JP Morgan analysts said in a report.

“It provides a level of certainty in the regulatory outlook and will likely allow for logistic providers and distributors to be confident in reinvesting back into the channel.”

Macquarie released a report saying it had initiated coverage on Blackmores shares with a $150 price target and “outperform” rating, supported by the development in China.

“Blackmores has been successful in leveraging a strong domestic market position to capitalise on China’s insatiable appetite for higher-quality health food products,” the analysts said.

“We expect the emergence of China’s middle class, demographic trends, rising health awareness and supplement usage to underpin consumption growth. While an evolving regulatory landscape creates some near-term uncertainty, government actions and recent commentary are overwhelmingly in support of growth in cross-border e-commerce trade, with orderly progression of the market key.”