2-child policy boosts Korea shares

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2-child policy boosts Korea shares

Korean companies specializing in baby and kids products saw their shares skyrocket on Friday, a day after the Chinese government announced it was ditching its three-decade long one-child policy to allow families to have two children.

One company that saw its shares surge was Zero to Seven Inc., a Maeil Dairies subsidiary that operates 250 children’s clothing stores in China. At one point, its shares reached the daily trading limit of 30 percent, hitting 16,600 won ($14.60) a share.

The excitement subsided later in the day, but shares closed at 14,150 won, up 10.55 percent. Parent company Maeil Dairies also saw its shares spike. Although they didn’t reach the daily trading limit, they went up as much as 13 percent, or 5,100 won, more than the previous day, to be traded at more than 40,000 won. Maeil Dairies shares closed at 39,100 won, 500 won or 1.3 percent higher than Thursday. Friday’s close was the highest price the company’s shares have reached in more than two months.

The last time they were at that level was on Aug. 17, when shares closed at 39,950 won.

On Thursday, Maeil Dairies, famous for powered milk for babies, announced it had signed an agreement with China’s No. 1 baby food manufacturer, Beingmate, to create a joint venture and enter the Chinese premium baby formula market.

Agabang & Company, which specializes in baby products including clothing and accessories, saw a similar spike at the beginning of the day, with its shares surging as much as 19.8 percent. At the end of the day, they closed at 13,100 won, 1.95 percent higher or 250 won more than Thursday.

The company is a subsidiary of Chinese clothing company Lancy Group, which bought a controlling stake of the Korean baby clothing company last year.

“The announcement by the Chinese government to ease the one-child restriction was the biggest policy change the market was waiting for,” said Cui Hongmei, a KDB Daewoo Securities analyst. “Allowing all households to have two children without conditions is an additional regulation relaxation. Despite easing the regulation in 2013 to allow families to have two children when one of the parents is an only child, that didn’t lead to any significant improvement.

“The two-child policy is considered a long-term project that the Chinese government is using to solve the aging Chinese society problem and expand the domestic market and urbanization.”

The analyst said the policy change will likely have a positive effect on businesses related to babies and children.

In 2013, U.S. consulting firm Frost speculated that industries for kids that are newly born through 3 years old will enjoy annual growth of 23.5 percent between 2010 and 2015. During the same period, Chinese consumers’ spending on such toddlers will grow at 19.1 percent annually, which exceeds the average 12.8 percent annual growth recorded between 2006 and 2010.

The Chinese government announced on Thursday that it was abolishing the one-child policy set in 1979 under Deng Xiaoping. In a statement, the Chinese National Health and Family Planning Commission said the changes would not only increase labor supply but also ease the aging of China’s population and contribute to sustained and healthy economic growth.

The changes come at a time when China’s economy has been slowing. In the third quarter, it grew 6.9 percent, the slowest growth since 2009.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
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