Investors appear to be finally catching up with the previously announced new rules regarding the importation of certain goods into China. Amongst the rules already announced is a 12% import tax to protect domestic retailers by levelling the playing field with overseas competitors.
Another recently announced rule change which has unnerved investors is the implementation of restrictions surrounding whether a product is considered a "health" food or not. A product designated as a "health" food is reportedly required to need Chinese regulatory approval, a process which is believed to take significant time to receive.
On Tuesday, Bellamy's Australia Ltd (ASX: BAL), A2 Milk Company Ltd (Australia) (ASX: A2M) and Blackmores Limited (ASX: BKL) had all experienced painful share price falls of around 5% or more.
The longer term picture is even more stark…
Since the beginning of calendar year 2016, Bellamy's share price has plunged around 33%, Blackmores is down 22%, while a2 Milk is off 5%.
The performance of these three "ASX growth darlings" over the past few months, coupled with the uncertainty over the regulatory changes being imposed by China should give investors a big reason to pause for thought.
Longer term shareholders of any of these three stocks could easily be sitting on capital gains of well over 100%.
Even after allowing for strong earnings growth, these stocks all still appear to be trading well above forecast market average multiples.
While it's possible that these stocks will still deserve a premium price in a few years' time, it's also possible that the market in its enthusiasm has factored in too rosy a future and not given enough weight to both the threats of regulatory reforms in China and increased competition.