Mr. Shangkong | Shares of local dairy-makers may win as rules force consumers to shop at home

The Netherlands is the latest country to limit infant formula purchases after some Dutch supermarkets found Chinese customers buying suspiciously large quantities of formula.

The Netherlands joins Hong Kong, Australia and Germany in seeking to curb what’s turning into a small industry – buying huge amounts of formula to export to China, where many people are justifiably suspicious about the integrity of the home-grown product.

But while attention has focused on the Chinese speculators buying the stuff and re-selling it at a profit, analysts say it might be time to think about investing in some Chinese dairy groups that are already listed in Shanghai and Shenzhen.

It’s no secret that many years Chinese parents prefer to buy baby formula abroad, particularly from Hong Kong, the favourite shopping destination for mainland Chinese travellers. Mainland Chinese are justifiably still wary about China’s dairy products after a series of food safety scandals, not least of which involved baby formula.

In 2008, milk powder produced by China's Sanlu Group was found to have been adulterated with the industrial chemical melamine, causing the deaths of at least six children and making more than 300,000 others ill.

But let’s face it – your baby still needs to be fed and if you have no choice but to buy the local product, you probably want to go for the best of the domestic brands.

“Imported milk formula is now out of stock (in mainland China). As a result, mainland consumers have fewer choices,” said Dong Guangyang and Long Jun, two industry analysts at China Merchants Securities (CMS) in a research note for clients.