The Bubs Australia Ltd (ASX: BUB) share price jumped around 22% on Tuesday. What happened with that?
An amazing Tuesday for the Bubs share price
It’s rare for any business to jump over 20% in one day. It’s particularly rare for a business that has gone through a tough time over the last four months. Before yesterday’s huge jump, the Bubs share price had fallen over 50% since 1 February 2021. Ouch.
Shareholders are still nursing quite a lot of that decline. But there appears to be some good news. So good, that investors seem to be saying Bubs is worth 22% more on this news.
It wasn’t a company update that caused the jump. Seemingly, the surge happened because of a change in Chinese policy.
The rise in the Bubs share price was so big that it caught the attention of the ASX, which asked Bubs what was going on.
The response
Bubs confirmed to the ASX that there wasn’t any hidden announcement that the market didn’t know about yet. It said:
“The company is aware, via publicly reported news articles, that the Chinese government today announced it is scrapping a policy limiting couples to two children, and will now permit families to have three children without financial penalty with the formal introduction of a third-child policy. The company is aware that the policy announcement has been widely reported, both internationally and in Australia, including across the Australian Financial Review and ABC News.”
Is this a big deal for the Bubs share price?
It certainly seems so. Remember, China is a gigantic market of 1.4 billion people. If Bubs can capture some of the consumer market share there, then it could become a much larger business. It’s the difficulties with Chinese demand and revenue that is a big factor in the (recent) poor investor sentiment that the company is currently facing.
More babies should mean more overall demand for infant formula, which should be a boost for Bubs.
Don’t forget, Bubs is growing well in Australian retailers (like Chemist Warehouse) as well as in other international markets, excluding China. But a better outlook for Chinese demand could be a very helpful thing for Bubs.
Bubs a high-risk idea, but it could be one of the ASX growth shares to follow, particularly at this lower price (compared to 12 months ago).