Government Officials in this Foreign Industry Pressing for Consolidation Following Scares in Recent Years; Related Stocks Could Benefit
Remember the scare over contaminated Chinese dairy from 2008?
Lots of children falling ill, some actually dying.
Regardless, all bad news.
Stocks like SYUT, a U.S.-listed, Chinese dairy producer highlight this bad news: peak to trough it declined by ~90% off its 2008 highs into its 2012 lows.
This process led to the consolidation pattern b/t lines (1) and (2) below, which I find appealing. A break above line (1) likely ushers in material upside.
At the same time, I’m beginning to see articles like this one highlighting Chinese authorities’ desire to drive consolidation in the industry through subsidies, etc to main-land producers, all in an effort to get its citizens to purchase more dairy from them and less from foreign ones.
Even though SYUT is not one of the companies to receive subsidies (too much foreign ownership), consolidation will nonetheless be favorable for it and perception-wise, for its stock.
In addition, articles like this one highlight Western firms such as KKR and their desire to invest in China-based dairy farms to create a source of reliable product and also to help drive consolidation in the industry.
All in, technicals (chart above), fundamentals (links above) and macro (see various China-related posts on this site) may be congealing to create a very favorable outcome for SYUT in the near/intermediate-future.
FYI – liquidity in this name is tight, be careful in acquiring if you do. Hopefully, if the idea begins to work, that problem takes care of itself.