Traders pig out on China pork stocks as deadly African swine fever roils world’s biggest pig market

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Source: South China Post

  • Shares of Muyuan Foodstuff and Jiangxi Zhengbang have doubled in past year
  • Stock prices still have room to grow, analysts say, as African swine fever kills off China’s pigs

Traders in China pork-breeding stocks have been feeling mighty piggy, fattening up their portfolios amid an outbreak of deadly African swine fever.

Shares of Muyuan Foodstuff and Jiangxi Zhengbang Technology have shot up to record levels, at least doubling over the past year.

Traders are betting the pig disease that has rapidly swept through China will continue to disrupt supply and keep boosting the share prices of breeders.

Brokerages from Shenwan Hongyuan Group to Citic Securities predict pork prices will top their record high set in 2016 as early as the end of the year. They cite the massive slaughter of pigs aimed at curbing the spread of the disease that has already sent the stock of breeding sows – a gauge of underlying pork supply – plunging by a record 20 per cent this year. China’s population of pigs will shrink by 134 million herds, or 20 per cent, in 2019, according to the US Department of Agriculture.

Given the outlook of pork prices amid strained supply, no cure in sight and an acceleration in earnings growth, pig-breeding stocks have more upside room to run, even after the sizeable gains, according to investors including Hengsheng Asset Management and Xufunds Investment Management.

“Experience and logic tell us that the more the stock of breeding sows falls by, the higher pork prices will rise to,” said Dai Ming, a fund manager at Hengsheng Asset in Shanghai. “We are seeing the (pig population) stock falling by the record magnitude this year. So that means pork prices will rise far more sharply going forward than ever before. A big imbalance between supply and supply will support the stock prices.”

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