(Bloomberg) -- Chinese dairy shares surge as the government rolls out measures to support local milk production and encourage consumption.
Shares of China Mengniu Dairy Co. rose as much as 25% in Hong Kong, their biggest intraday gain since 2008, as authorities offered support through loans and vouchers. Inner Mongolia Yili Industrial Group Co. gained as much as 8.9% in Shanghai.
The policy support comes amid the industry’s continued struggle with excess production capacity built up over years. China also launched an anti-subsidy probe on imports from the European Union in August, which limits some overseas supply.
“China’s plan to boost support for the country’s struggling dairy sector could trigger upgrades to 2025 consensus for dairy firms such as Mengniu and Yili,” said Ada Li, an analyst at Bloomberg Intelligence. “Measures including loan support and the promotion of dairy-products consumption through vouchers have the potential to improve sales and profit margins.”
The new incentives, along with other consumption measures announced ahead of the holiday season, may further boost optimism for producers. Dairy consumption in China remains low at 42.4 kilogram per capita in 2023, about one-third of the world’s average, according to Bloomberg Intelligence data.
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