A food contamination scare at New Zealand’s Fonterra, has brightened the outlook for China’s domestic industry while hurting the earnings prospects of Want Want China that source raw milk from the world’s largest dairy exporter.
** Fonterra said on Saturday it had found bacteria which can cause botulism in some of its dairy products, prompting China, and then Vietnam, to recall affected products.
** Want Want China, which Barclays says gets 70% of its raw milk from New Zealand, was the top loser on the HSI.
** Want Want, at 24.3 times forward earnings, still trades at a slight premium to its historical valuations and at about twice that of the broader Hong Kong market.
** Any spike in prices for domestic milk supply in China bodes ill for Want Want that has enjoyed healthier profit margins relative to peers. link.reuters.com/dyn22v
** Meanwhile, Chinese supplier China Modern Dairy, which supplies to soon-to-be Mengniu Dairy unit Yashili, was up 5.2%.
** The latest news from New Zealand could halt earnings downgrades for China Modern where forward EPS forecasts are off just over a percent over the past month.
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