Sharemarket gains as investors bet on a2 Milk recovery

The sharemarket gained, led by a recovery in The a2 Milk Company as optimism grows that its difficulties in the key Chinese market may have eased.

The S&P/NZX 50 Index gained 48.321 points, or 0.4 per cent, to 13,114.24 on Wednesday.

A2 Milk was the biggest stock traded by value, with $21 million worth of shares changing hands. The company’s shares closed up 6.2 per cent at $7.68. Their value has halved over the past year.

The specialty milk marketer has suffered setbacks during Covid-19 as border closures prevented Chinese tourists and students shipping its premium infant formula back to China, in what is known as the daigou trade. Demand also dropped away after consumers stocked up their pantries early in the pandemic, and then stopped buying.

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However positive reports from other dairy companies about improved trading in China is giving investors confidence that the worst may be behind it.

Last week, infant formula company Bubs Australia reported first quarter sales of its infant formula in the daigou channel jumped 6.5 times on the prior year and were up 265 per cent quarter-on-quarter.

And overnight, French dairy giant Danone noted in a quarterly update that its daigou channel to China had returned to growth after declining about 60 per cent in the same period last year, and that its infant formula channels to China were growing.

“Last week Bubs out of Australia reported a change in momentum and Danone overnight reiterated that,” said Hobson Wealth Partners investment adviser Brad Gordon. “We do see green shoots.”

A2 Milk is scheduled to host an investor day next week where it is expected to provide an update on how its business is tracking.

Healthcare and animal care company Ebos Group rose 0.9 per cent to $35.30, adding to its 1.4 per cent gain on Tuesday following its annual meeting.

Ebos chief executive John Cullity told shareholders that revenue and earnings for the first three months of the financial year were up just over 10 per cent, and its portfolio of businesses “has proven to be very resilient throughout the Covid-19 pandemic”.

He also announced the company had acquired MD Solutions, an Australian distributor of medical devices and consumables, and signalled further investments may be looming.

Forsyth Barr said the trading update confirmed a positive start to the year, with solid growth across the board, ahead of analyst expectations.

Outside of the benchmark index, cervical cancer test developer TruScreen jumped 39 per cent to 8.9 cents after it announced the achievement of key milestones relating to its development of its technology and its overseas growth…