Condom Shares Fall After China Abandons One-Child Policy

China's abandonment of one child policy brought excitement not only to the general populace but also to companies that make nappies, pus...

China's abandonment of one child policy brought excitement not only to the general populace but also to companies that make nappies, pushchairs and baby milk. It is tears for the maker of a well-liked brand of condoms, it is not the brightest of times.

Investors on Friday bet on a bump in sales for companies with baby or child-related businesses after China’s Communist leaders announced that all married couples would be allowed to have two children. The economic waves travelled as far afield as New Zealand, where the currency of the dairy exporting country surged.

Condom Shares Fall After China Abandons One-Child Policy

Analysts at investment bank Credit Suisse estimated that the relaxed controls would result in an extra 3 millions to 6 million babies born annually in the five-year period starting in 2017. China, the world’s most populous country with almost 1.4 billion people, has about 16.5m births each year.

The one-child policy began in 1979 to curb a surging population at a time when extreme poverty was widespread in China.

The Credit Suisse report said that with the annual cost of raising a child estimated at 40,000 yuan (£4,100), the extra births would translate into an extra 120bn-240bn yuan in consumer spending a year, or 4-6% of China’s total retail sales.

One of the biggest winners in the financial markets was China Child Care, which makes hair and skin care products for children. Its shares ended 40% higher on Hong Kong’s stock exchange on Friday.

On the losing side, Japanese condom maker Okamoto Industries, a favourite of Chinese visitors to Japan, slumped 10% in Tokyo.
Infant formula makers in Hong Kong and mainland China rose strongly, led by Beingmate Baby & Child Food, which jumped 10% on China’s smaller Shenzhen stock exchange.

Japanese companies were also among the beneficiaries. Baby bottle maker Pigeon Corp surged 10.7% while nappy makers Unicharm and Kao both rose nearly 4% in Tokyo.

Japanese and other foreign brands are popular with Chinese buyers because they are seen as being authentic and better quality. Those characteristics are prized in China following food and other product safety scandals involving domestic brands.

Some cautioned the increase in births may not be as big as predicted because of the expense of raising a second child and other factors.

“The rush for baby-related stocks may not necessarily bear fruit,” said IG analyst Bernard Aw in a report.
In New Zealand, the local dollar gained nearly 1% to $0.6772 (30p). The country is a major dairy exporter and its milk powder and formula industry would be likely to benefit from a small baby boom in China.

Some baby stocks started rising on Thursday before the official announcement on Chinese state media.

Goodbaby International, which makes pushchairs, car seats and cribs, rose 7.4% on Thursday and followed that up with a 2.3% gain on Friday. Rumours had already been swirling in China that the policy would be adjusted at a meeting on China’s next five-year plan that was held this week.

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