Decline in Birth Rates: China's births in 2025 fell to 7.92 million, a 17% decrease from 2024, which was below expectations and may negatively impact infant formula stocks.

Government Measures: Despite various government initiatives to encourage childbirth, including extended parental leave and relaxed marriage registration, the low birth rate continues to be a significant issue.

Demographic Challenges: The declining birth rate presents serious demographic challenges for China, prompting speculation that the government may introduce additional incentives to promote marriages and births.

Stock Ratings: A report from Citi Research includes ratings and target prices for infant formula stocks, indicating a mixed outlook for companies in this sector amidst the declining birth rates.

Birth Statistics: China's births for 2025 were reported at 7.92 million, a 17% year-on-year decline, falling short of expectations from CLSA and the milk formula industry.

Market Implications: The lower birth numbers indicate increased competition in the infant milk formula market, emphasizing the importance of product structure and sales momentum for companies.

Consumer Trust: Companies with a stable customer base in earlier product stages and the ability to build consumer trust are likely to benefit as the market shifts towards stage 3 products.

Preferred Stocks: CLSA favors YILI and H&H International Holdings over China Feihe, rating them as Outperform with target prices set at RMB34, $16.4, and $4.9, respectively.

Haitong International Coverage: Haitong International has initiated coverage on H&H INTL HLDG (01112.HK) with an Outperform rating and a target price of HKD17.

Profit Projections: The report estimates H&H INTL HLDG will achieve net profits of RMB415 million, RMB641 million, and RMB818 million for 2025-2027, indicating significant year-on-year growth.

Market Performance: The Hang Seng Index (HSI) fell by 202 points (0.8%) to close at 24,998, while the HSTI and HSCEI also experienced declines of 53 points (0.9%) and 103 points (1.1%), respectively.

Active Heavyweights: Major stocks such as Meituan, Alibaba, Tencent, and Xiaomi saw significant drops, with Meituan leading at a decrease of 12.6%, while short selling activity was notably high for these companies.

Notable Movers: SMIC and Trip.com showed strong performance, with SMIC rising by 10.8% to a new high, whereas XPENG and Anta Sports faced substantial losses of over 8% and 5%, respectively.

Short Selling Trends: Various stocks experienced notable short selling ratios, with some like InnoScience and HorizonRobot showing impressive gains, while others like Boan Biotech and AK Medical suffered significant declines.

Morgan Stanley Adjustments: Morgan Stanley has adjusted target prices for several Chinese consumer stocks, lowering the target price for HENGAN INT'L due to anticipated sales pressure, while increasing the target price for H&H INTL HLDG based on strong demand for milk powder products.

Market Outlook and Risks: The report highlights potential risks for earnings forecasts in 2026 for companies like HENGAN INT'L, while also noting stable growth expectations for SUNART RETAIL under new management and market share challenges for ZHOU HEI YA amidst competition.