HK Stock Market Move | Dairy stocks generally rose in the morning, with raw milk prices expected to stabilize in the near future. The industry is expected to accelerate in the second half of the year.

The dairy sector stocks rose across the board in the morning, as of the time of writing, Youran Dairy (09858) rose by 5.74% to HK$3.13; CH Modern Dairy (01117) rose by 3.36% to HK$1.23; China Feihe (06186) rose by 1.95% to HK$4.18; China Shengmu (01432) rose by 1.59% to HK$0.32. Guosheng Securities released a research report stating that after a four-year downward cycle, raw milk prices have recently stabilized. The average price of raw milk in the main producing areas of the country has gradually increased from 3.02 yuan/kg in August to 3.04 yuan/kg at the end of September. The price of bulk milk in Ningxia has increased from 2.1-2.2 yuan/kg to 3.5-3.7 yuan/kg. This is partly due to the demand for Mid-Autumn Festival and National Day gifts, and on the other hand, the supply of milk naturally decreases during the "heat stress" period of cows in September. The current round of milk prices is nearing the end of the downward cycle, accompanied by an accelerated destocking of inventory, and is expected to reach a turning point. However, with the increase in the proportion of large-scale dairy farms, the fluctuation of milk prices will be significantly stabilized. For dairy companies, the narrowing of the decline in milk prices and the reduction of losses through destocking will lead to a recovery in profit on the financial statements. Tianfeng pointed out that since September, although the stocking up before the Double Festival and the production demand for student milk have driven a rebound in bulk milk prices in some regions, the overall raw milk prices in the main producing areas remain stable. Currently, milk prices are still below the cost line, industry losses and the financial pressures brought by silage continue to exist, and the destocking of production capacity continues to play out. The inventory of dairy cows decreased by 0.18% month-on-month in September (compared to a decrease of 0.2% in August), with a cumulative destocking rate of about 8%. The bank believes that although the Double Festival factors provide short-term support for milk prices, the trend of capacity reduction in dairy enterprises continues, and there is no need to worry too much once the holiday consumption support weakens. Currently, the destocking of production capacity may be nearing an end, and the expecta