A2 Milk rallies after China keeps status quo on e-commerce rules

A2 Milk chief executive Jayne Hrdlicka. Photo/NZ Herald.

A2 Milk shares rose 4.4 per cent today after news that China's current policies on cross-border e-commerce retail imports will continue.

In August, the Chinese government passed a new law providing a framework for all activities relating to e-commerce in China, both domestic and cross-border. With the law to come into effect on Jan 1, 2019 it had been due to publish the related guidelines.

A2 Milk chief executive Jayne Hrdlicka, however, had previously said the company wasn't expecting any abrupt changes.

A statement on the State Council website said: "China will expand and improve the existing policies on retail imports and exports via cross-border e-commerce to widen opening-up and unlock the potential of consumption, the State Council's executive meeting chaired by Premier Li Keqiang decided on Nov 21".

In the first 10 months of the year, retail imports from cross-border e-commerce reached 67.3 billion yuan ($14 billion New Zealand), up 53 percent on the year, the statement said.

A2 Milk said that the government has confirmed that goods included in the CBEC retail imports list, which includes infant formula, will continue to benefit from more relaxed regulation as imports for personal use and will not require registration or a filing process, or first import license approval.

Also, imported items on the list will continue to enjoy preferential tax rates with the following higher transaction thresholds applying to individual consumers in China.

The stock last traded at $10.44 as the news removes a layer of uncertainty.

In China, A2 Milk operates a multi-channel approach to selling its products, using online platforms such as Kaola.com, JD.com and Alibaba's T-mall, alongside bricks and mortar stores. It also relies on the so-called daigou, which are essentially an army of informal traveling shopping agents who buy products in Australasia for sale in China.

The news also benefited its partner Synlait Milk, which manufactures its products. Synlait shares were up 4.8 per cent at $8.66.

Any gains may be capped, however, after Synlait Milk said it was facing a further setback in its effort to register its Munchkin Grass Fed infant formula in the US.

In a statement to the stock exchange, it said it will be re-submitting the application to the Food and Drug Administration to include additional supportive evidence. It anticipates this process will take approximately 24 months.

It said its current year outlook remains unchanged and the business is on track to deliver another profitable result – but not at the same growth rate as FY18.