China has announced the scrapping of its one-child policy and allowing parents to have their second child as early as the beginning of 2016. But coming faster than babies are market reactions, from baby formula, car-seat makers to maternity labs. The new policy is expected to have broad impact on the Chinese economy, from consumer demand to labor supply.
A potential surge in newborns is at least many months away, but stocks in companies that cater to them are already on the rise. Immediately after the CPC Central Committee suggested the end of China's one-child policy in mid November, a slew of baby-related stocks surged in value.
On the day of the announcement, Stroller and car-seat maker Goodbaby International jumped 7.4%, while Shenzhen-listed Beingmate Baby & Child Food also rose 4.8%. And Chinese investors may be going too far on this one, even prices of stocks of some piano brands also witnessed a pretty significant uptick on the day, betting on the consumption power of overzealous parents. Also in China, extended families often live under one roof and therefore the appetite for bigger cars is strong. And the "second child policy" is potentially turning China into the largest market for multipurpose passenger vehicles, or MPVs, only after the United States.
Many industry experts think it will still take some time before the golden era of MPVs comes. After all the second child policy has just been phased in, and will not officially come into effect until next year.
