The Motley Fool

Infant formula companies sink lower on new Chinese e-commerce laws

It certainly has been a disappointing start to the week for infant formula shares.

Although the A2 Milk Company Ltd (ASX: A2M) share price has rebounded from its early decline and is almost 1% higher at $11.60 now, many of its peers are sinking notably lower.

Here is the state of play in the industry right now:

  • The Bellamy’s Australia Ltd (ASX: BAL) share price is down 4.5% to $10.47.
  • The Bubs Australia Ltd (ASX: BUB) share price has fallen 5.5% to 67.5 cents.
  • The Jatenergy Ltd (ASX: JAT) share price is 13.5% lower at 5.8 cents.
  • The Wattle Health Australia Ltd (ASX: WHA) share price is down 4% to $1.22.

Why are these infant formula companies being crushed today?

Today’s declines appear to be in response to a new China e-commerce law that was announced late on Friday.

According to the Global Times, the new law aims to make the fence tighter against unethical sales practices on the internet. It requires that domestic e-commerce websites guarantee that consumers’ rights are protected in online business transactions.

This means that if a consumer suffers from health problems as a result of a product bought online, e-commerce platforms will be held accountable if they didn’t properly audit the business qualifications of the sellers on the platform.

E-commerce website operators will also be obliged to record and store product information as well as transaction information on their platforms.

The new e-commerce law will come into effect from January 1 2019. Further implementation guidance, including implications in respect of the cross border grace period, is expected in the coming months.

What now?

While I’m surprised to see Bellamy’s shares dragged lower on the news, I’m not overly surprised to see the likes of Bubs, Jatenergy, and Wattle Health tumble.

Now that e-commerce platforms can be held accountable for issues, I fear some could be unwilling to stock less established brands that they can’t guarantee the safety of.

Time will tell whether this does impact sales, but for now I would suggest investors wanting exposure to the space stick with Bellamy’s and a2 Milk Company.

Alternatively, these high-flying blue chip shares could be great options for investors.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

FREE REPORT: Five Cheap and Good Stocks to Buy now…

Our Motley Fool experts have FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.7% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.