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SCMP Reporter

Mainland food and beverage stocks sank yesterday after Beijing imposed curbs on their prices to combat rising inflation, and analysts said investors would continue to be unnerved by potential further measures.
The National Development and Reform Commission on Wednesday capped prices on a range of products including grain, meat, milk, edible oil, eggs and liquefied petroleum gas.
It requires 12 major food and beverage companies including Tingyi (Cayman Islands) Holdings Corp, China Foods, Inner Mongolia Yili Industrial Group, China Mengniu Dairy and Uni-President China Holdings to seek approval  for any price rises.
'The price  intervention will have a negative impact on food and beverage companies since they are facing mounting pressure from rising prices of raw materials, but can't pass them on to end users,' said Chen Xun,  an analyst at Ping An Securities.
Shares in recently listed Uni-President, the mainland branch of Taiwan's largest food and beverage conglomerate, slumped 12.2 per cent to HK$4.82,  while Tingyi, an instant noodle and sweetened tea maker, declined 7.65 per cent to HK$10.62.
Three top milk producers also fell, with Mengniu diving 8.47 per cent to HK$22.70  and Shanghai-listed Yili and Bright Dairy dropping 6.54 per cent and 5.52 per cent, respectively.
Shares in meat processor China Yurun Food Group fell 1.82 per cent to HK$10.80  and Shenzhen-listed peer Henan Shuanghui Investment & Development lost 5.08 per cent  to 55.87 yuan.
Food and beverage 'companies can't pass on higher costs to customers and this will result in lower margins,' an ICEA report said. 'We expect these players would probably try to raise prices by introducing more high-end products.'
Affected by virus outbreaks, hog prices on the mainland rose 71.3 per cent  last year, while global grain prices increased more than 30 per cent  due to poor harvests and increasing production of biofuels such as ethanol.
Beijing has a final say on any price adjustments and also the power to reverse  unreasonable increases.
However, the measures, arguably the toughest Beijing has imposed in years, sparked concerns that they will drive producers to the black market and thus further tighten supply.
Deutsche Bank chief economist Ma Jun  said the near-term inflation upside risk and ad hoc price controls  might keep many investors uneasy.



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Yili Group

Food and drink stocks dive on price curbs