Chinese E-commerce regulations to impact Aussie exporters

Stock

A2 Milk (ASX:A2M) $11.75 & Bellamy’s (ASX:BAL) $10.35 as at 3/09/2018

Event

The Chinese Government released new regulations for the e-commerce industry over the weekend, and although it is early in to implementation, it appears to have some impacts on participants in the Chinese retail market. A2 Milk released a brief note this morning, welcoming the new regulation which hopes to protect the Chinese consumer market which will force platforms into more responsibility over the products it sells and the protection of customers. This works to make to both harder and easier to sell into the ever growing Chinese middle class market. Those with Chinese retail licences should see an initial kick with inventory sell downs before the regulations come into effect next year, while seeing an ongoing demand while they are viewed as a responsible provider. Those without licences may also see the sales increase short term, however avenues to sell into the market will likely dry up as the regulations are enforced.

A2 Milk’s SAMR registration should help the company tackle to ever changing regulation in China, but while Bellamy’s application continues to be delayed the stock will likely struggle

A2 Milk (ASX:A2M) Chart

ASX:A2M chart

Bellamy’s (ASX:BAL) Chart

ASX:BAL

Market Matters Take/Outlook

The changes won’t come into effect until January 2019 however the risks will start to be priced in. We like A2 Milk for its unique position while remaining cautious on Bellamy’s. BAL is down around -5.5% while A2 Milk is up over 2%.