Driven by domestic demand, Moutai’s market capitalization hits 1 trillion yuan

By Xie Jun Source:Global Times Published: 2019/3/18 20:08:39

A bottle of Kweichow Moutai Photo: VCG


Shares of China's top distiller  Kweichow Moutai rose 4.22 percent on Monday, taking the company's market capitalization past 1 trillion yuan ($149 billion). 

Moutai is one example of gains in the sector in recent days, partly pushed overseas activity.

At the close on Monday, the shares stood at 810.09 yuan, compared with 598.98 yuan on January 2, the first trading day this year. 

The shares of Shuijingfang, another popular liquor maker in China, were up 5.07 percent to close at 44.32 yuan on Monday.

Overall, the sector surged 8.09 percent on Monday, with eight companies including Gujinggong and Luzhoulaojiao rising by the 10 percent daily limit.

The sector's surge has been partly driven by overseas investors. According to eastmoney.com, in the week ended last Friday, about 158 million yuan worth of overseas capital had flowed into the Shanghai bourse to buy Moutai shares via the stock link program between Hong Kong and Shanghai. 

Wuliangye has also been targeted by overseas capital, data on eastmoney.com showed. 

Liao Zongkui, a strategy analyst at LX Securities, told the Global Times on Monday that Chinese distillers comprise a "unique" sector in China. The companies have high gross profits and do not have replacement products in overseas countries, making them very "appropriate" investment targets for overseas investors.

"Compared with overseas food and beverage shares, many of China's wine companies do not have very high market valuations, thus giving them an advantage in investment. Generally speaking, the valuation-setting power of China's distilling sector has gradually shifting toward overseas investors in recent years," Liao said. 

Domestic liquor expert Cai Xuefei said the sector is almost "going against the stream" as China's economy slows in general, is due to large, inelastic demand in China.

According to a statement released by Moutai in January, the company's profits surged 25 percent year-on-year to 34 billion yuan in 2018. 

Shuijingfang estimated that its profits in 2018 were up 73 percent on a yearly basis, according to the company's statement released at the end of January. 

Cai said that Moutai is targeted by overseas investors as they think that the company's strategy to target high-end customers, such as government officials, makes the company's products "irreplaceable." 

He said that Chinese distillers' main market is and will always be in China, as overseas customers have different drinking habits, so exporting won't be a focus for those companies in the future. 



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