Shares in Chinese toy makers, diaper producers and infant food companies soared for the second day on Tuesday, as investors piled into stocks seen as benefitting from Beijing's new three-child policy.
China's announcement on Monday to allow married couples to have up to three children - from the previous limit of two - also sent brokerage analysts scrambling to recommend stocks, despite a widely-shared perception that the policy shift won't have a sudden impact on the country's declining birth rate.
Shares in toy maker Goldlok Holdings (Guangdong) Co (002348.SZ) jumped to their 10% daily limit for the second day, as did shares in Jinfa Labi Maternity & Baby Articles Co (002762.SZ).
Other baby-related stocks, including milk powder maker Beingmate Co (002570.SZ), baby products maker Shanghai Aiyingshi Co (603214.SS) and toddler care equipment maker Ningbo David Medical Device Co (300314.SZ) also soared.
An index tracking the so-called "third baby concept" stocks, newly compiled by Hithink RoyalFlush Information Network Co (300033.SZ), rose about 2.5% on Tuesday, while China's benchmark stock index (.CSI300) was roughly flat.
Hu Yunlong, a Beijing-based hedge fund manager, said the sharp gains in such stocks were the result of "short-term speculation," as he sees limited immediate impact on corporate fundamentals.
China lifted the cap on births in a bid to stave off risks to its economy from a rapidly aging population. But analysts say the policy by itself is unlikely to boost many couples' willingness to have more children, given high childcare costs.
Still, Xu Qi, investment adviser at Guosheng Securities, said Luolai Lifestyle Technology Co (002293.SZ), which makes home textile products such as quilts and pillows, stands to benefit from the new policy. He also recommends Zhejiang Semir Garment Co (002563.SZ), which makes children's clothes.
Essence International suggested investors pay attention to China Feihe Ltd (6186.HK), a Hong Kong-listed maker of infant milk formula products.
Meanwhile, Chinese listed companies fielded questions from investors anxious to learn how their businesses will be affected by the new policy.
Thinker Agricultural Machinery Co Ltd (603789.SS), a maker of rice harvesters, was asked if the company was a "third-child concept" stock.
"Thanks for your humorous question," the company replied in an online investor relations platform.
The indirect relationship is that "an increase in population will increase grain consumption...and demand for harvesters.
"But the precondition is...people are willing to have a third child."