Near-term downside threatens all of China's tissue paper players. Yet we believe the country's leading players will still manage to benefit in the long run thanks to their unrivalled scale and brand power. In time, many of the smaller players in the market will exit, leaving Hengan and Vinda room to increase market share, we believe from 9% and 6% in 2011 to 15% and 11%, respectively, in 2015.

While overcapacity will define the tissue paper industry in FY12-13F, low pulp cost will prevent overcapacity from becoming a crippling issue. Both Hengan and Vinda have been accumulating pulp at around US$650/ton, compared with US$710/ton in FY11; moreover, we expect pulp cost to remain in check throughout FY13-14F as new pulp capacity comes on line globally. This will alleviate some of the pressure from oversupply on average selling prices.

In addition to tissue paper products, China's personal and family hygiene industry, valued at over RMB110b in 2011, also encompasses female hygiene and baby diaper products. We expect the market leaders in sanitary napkins to maintain steady growth based on brand loyalty. The penetration rate for sanitary napkins is already high at 87%, yet we forecast healthy high-teen growth for the leading players, in particular Hengan.

In our view, disposable diapers have the highest growth potential among the different personal hygiene products thanks to the segment's low penetration rate of 39%. The top-six diaper manufacturers, a group that includes Hengan, account for 80% of the market and look set to raise existing entry barriers to new players even higher through new product launches.

Eoin Treacy's view I first reviewed diaper and sanitary napkin companies as an individual sector following a trip to China last year. That tour was notable because it was the first time I had seen someone in rural China using a disposable diaper. (Also see Comment of the Day on November 16th 2011). Diapers represent a significant growth story as per capita incomes improve and demand for products offering greater convenience and improved hygiene continues to expand.

Hengan International is an S&P Pan Asia Dividend Aristocrat and yields 2.11%. The share has pulled back to test the HK$70 region where it found at least short-term support this week. A sustained move below that area would now be required to question potential for continued higher to lateral ranging.

Demand growth for health and hygiene products is not limited to China but is on an upward trajectory across most high growth markets. India's Godrej Consumer Products broke out of an 18-month range in April and continues to hold a progression of higher reaction lows. While somewhat overextended relative to the 200-day MA at present, a sustained move below INR660 would be required to question the consistency of the advance.

In the USA, Procter & Gamble (Pampers, Always) is an S&P 500 Dividend Aristocrat, yields 3.21% and is the marker leader in this sector. The share found support in the region of the 200-day MA last month. A sustained move below $66 would be required to begin to question medium-term scope for continued higher to lateral ranging.

Kimberly Clark (Huggies, Kotex) is also an S&P 500 Dividend Aristocrat and yields 3.49%. The share completed an eleven-year base in last 2011 and has been consolidating above $80 since July. A sustained move below that area would be required to begin to question the medium-term bullish hypothesis.

We consider both Procter & Gamble and Kimberly Clark to be Autonomies.