Date
16 October 2017
China Mengniu Dairy will be included in the Hang Seng Index from next month. Photo: Bloomberg
China Mengniu Dairy will be included in the Hang Seng Index from next month. Photo: Bloomberg

The Big Picture: CREAM OF THE CROP

It came as a surprise but the cream of the Chinese dairy industry is about to be included in Hong Kong’s benchmark stock index. Hang Seng Indexes Co. Ltd. said Wednesday that China Mengniu Dairy Co., Ltd. (02319.HK), the nation’s biggest dairy company, will be one of the 50 blue chips in its Hang Seng Index from March 10, replacing China Coal Energy Co. Ltd. (01898.HK).

Observers said the unexpected move is likely to help boost dairy stocks, which include Yashili International Holdings Ltd. (01230.HK) and China Modern Dairy Holdings Ltd. (01117.HK).

The announcement also comes as France’s Danone SA agrees to pay 486 million euro (US$663 million) to raise its stake in Mengniu to 9.9 percent from 4 percent, becoming the second-largest shareholder in the Chinese company, according to a Hong Kong stock exchange filing. Danone’s decision to expand its stake sent Mengniu shares up 3 percent Wednesday.

Mengniu chief executive Sun Yiping {孫伊萍} previously told the Hong Kong Economic Journal’s EJ Insight that it plans to bulk up on high-end offerings like baby formula in the coming few years to capitalize on China’s growing taste for the products.

That strategic push coincides with the National Development and Reform Commission’s rollout of the two-child policy in various provinces this year. The policy, launched in 2013, is already up and running in three provinces and will soon be launched in nine others, Xinhua reported, citing the National Health and Family Planning Commission.

Wednesday was also a good one for Shenzhen-based BYD Co. Ltd. (01211.HK). Hang Seng Indexes Co. Ltd. said it is adding the electric carmaker to the Hang Seng China Enterprises Index, nudging out Zoomlion Heavy Industry Science and Technology Co. Ltd. (01157.HK).

Guangdong FTZ to cover Baiyun airport bonded area, paper says

Guangdong province will expand its proposed free trade zone to cover Baiyun airport’s bonded area in addition to the three new areas of Nansha, Qianhai and Hengqin, the China Securities Journal reported Thursday, citing unidentified sources. The entire zone will cover 931.39 square kilometers with developable area of 295.39 sq km, making it 10 times larger than the 28 sq km expected to be developed at the Shanghai FTZ. The Guangdong FTZ, which aims to interconnect with Hong Kong and Macau, will not necessarily be called the Guangdong, Hong Kong and Macao Free Trade Zone as reported in mainland papers, the report said.

Rules tightened for asset management business, paper says

China will tighten regulatory standards for securities firms’ asset management business, including the banks they deal with, product design, risk control and due diligence, the Shanghai Securities News reported Wednesday, citing a notice issued by the Securities Association of China. Banks that work with securities firms on the business must have at least 50 billion yuan (US$8.24 billion) in assets at the end of the last fiscal year, up from 30 billion yuan, and a capital adequacy ratio of at least 10 percent, according to the notice. The association will conduct on-site inspections in relation to the new rules, which take effect from Feb. 17, the report said.

– Contact HKEJ at [email protected]

JP/SK

EJI Weekly Newsletter

Please click here to unsubscribe