The Bellamy's Australia Ltd (ASX: BAL) share price is up 22% this week!
BAL share price
Shares in the infant formula producer are down 30% for 2017, following huge selloffs earlier this year, but so far this week they are well ahead of the market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
What's going on with Bellamy's?
Yesterday, shares of Bellamy's, Blackmores Limited (ASX: BKL) and a2 Milk Company Ltd (Australia) (ASX: A2M) shot higher after it was revealed that the Chinese government would back down on import laws indefinitely.
The shock move caught the market off-guard, which was still reeling from the potential changes that were introduced just one year ago. Basically, the now repealed changes cut out the 'grey' market that allowed companies like Bellamy's to get their product into China. It also forced much more regulation on the suppliers of the products.
However, the new changes also open up e-commerce platforms like JD.com and Alibaba as a viable way to sell into mainland China.
Unfortunately, investors are likely scarred from the recent turmoil. Indeed, after falling from over $12 per share at the beginning of December 2016 to a low of just $4.32, the company is yet to regain much of the lost ground.
Bellamy's recently installed a new management team, which is likely one reason the market is nervous. But more concerning is the company's slim cash position and excess inventory, which accumulated after the regulatory changes took a hold.
Foolish Takeaway
Despite the recent regulatory changes, I think it is too soon to tell if Bellamy's is out of the woods. I'd hold off buying in right now and would instead consider its two ASX-listed rivals Blackmores and a2 Milk.
