Kiwi dairy group A2 Milk (ASX:A2M) has moved its shares from a trading pause to a halt, with a "potential acquisition" in its sights.
A2 Milk first had trading paused at 11:20 am after the shares surged nearly 9% in early trading to $6.24. At 1:09 pm, the pause transitioned to a halt, at the company's request, until next Tuesday, October 1.
A2 stated the halt was to "provide us with additional time to respond to ASX’s price query received this morning and to inform the market regarding a potential acquisition by us."
The company also requested for the halt to be extended to October 1 or lifted earlier if the deal is finalised.
There has been no indication of what the acquisition might be.
Some investors speculated that the early morning price surge could have been a reaction to positive news from China, where the government announced massive stimulus measures aimed at halting the decline in economic activity.
Like major iron ore miners such as Fortescue, BHP, and Rio Tinto, A2 Milk is a key China exposure stock—rising when the news is favourable and falling when it's negative or indifferent.
A2 Milk shares took a hit in August when the company, in its annual results, expressed uncertainty about the outlook in China.
However, the biggest challenge in China for A2 Milk isn't stimulus spending, but rather the country’s declining birthrate, and there's no sign of improvement.
In January this year, China’s National Bureau of Statistics reported only 9.02 million births across the country in 2023, half the figure from 2017. This helps explain why A2 Milk and other companies supplying infant formula are facing tough conditions in China.
Set alongside China’s 11.1 million deaths in 2023—an increase of 500,000 compared to 2022—China’s population shrank by 2.08 million in 2023, following a smaller decrease of 850,000 in 2022.
A2 Milk is also involved in a new funding deal with supplier Synlait, after years of disputes between the two companies.
