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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