Chinese competitors of Fonterra Co-Operative Group Ltd. are rising on news of contamination issues at the New Zealand dairy giant.
Milk and infant-product producers Biostime International Holdings 1112.HK +9.75% Hong Kong Ltd. and China Modern Daily Holdings Ltd. are up 8.6% and 7.6% respectively at midday, among the top five gainers on the Hang Seng Composite on Monday. The benchmark Hang Seng Index is 0.16% higher.
Fonterra said Saturday it found a “quality issue†involving three batches of whey protein concentrate, with some of that whey protein used in products including infant formula sold in China and other countries.
China, one of Fonterra’s biggest markets since the melamine contamination scandal in 2008drove Chinese parents to seek foreign milk powders from all around the world, said it would halt all imports of Fonterra products and New Zealand milk powders, knocking a huge competitor out of the Chinese market.
While Chinese companies that don’t have links to Fonterra are rising, those that count on the New Zealand company for raw materials are suffering.
Shares of food producer Want Want China Holdings Ltd. WWNTY +0.43% are taking a beating in Hong Kong, and were down 2.7% at the midday break. The company sources about 70% of its raw milk needs from New Zealand, and about 60% of that from Fonterra, says Barclays. In particular, its Hot Kid Milk product could suffer, as Want Want derives about 60% of its group operating profits from the brand.
Fonterra’s New Zealand-listed shares are down 4%, compared to the broader NZX index which is flat.
Source: WSJ