After technology and education, China “stretched” the wine industry
Shares of liquor companies in China all fell this week, following the move by the Market Regulatory Authority.
|A case of 1974 Guizhou Maotai wine sold for a “startling” price of 1 million pounds. Photo: AFP|
Shares of Guizhou Maotai Liquor Company (Kweichow Moutai) and many other businesses in the same industry have continuously dropped in the past 5 days after the appearance of new regulations.
China’s central government has issued a flurry of new regulations in recent months, some of which have surprised investors. For example, Chinese authorities ordered app stores to remove Didi ride-hailing app, just a few days after this “super app” was successfully listed in the US and collected. over $4 billion at the end of June. Following the takedown, Didi stock has tumbled 41% since then.
According to CNBC, the motto for “common prosperity” is the foundation for Beijing’s recent swift actions to tackle technology companies’ monopolies, strengthen data security and prevent “irregular capital raising activities”…
In China’s traditional white wine industry, Guizhou Maotai is the most expensive stock traded on the A-class mainland stock market. Guizhou Maotai as popular as the wine itself, a favorite drink of Chinese businessmen at business closing parties.
The Securities Times of the People’s Daily on August 26 cited trade reports that the Guizhou Maotai Liquor Company is trying to stabilize the selling prices of alcohol. products before the big holiday in the next two months. Accordingly, the price of a bottle of Guizhou Maotai has dropped by 300 yuan (equivalent to 46.40 USD) in the past day.
Meanwhile, Chinese media this afternoon reported that Maotai Guizhou said the company did not change the selling prices.
In fact, the price of bottles of Guizhou Maotai has increased in proportion to the company’s stock price, which is equivalent to several hundred dollars. Even in June, a case of Maotai Guizhou wine produced in 1974 was sold for a “startling” 1 million pounds (equivalent to 1.37 million USD) at an auction house. Sotheby’s professional pricing.
Shares of Guizhou Maotai Liquor Company lost more than 4% today, while shares of other white wine companies also suffered a sharp drop from the beginning of the week. In particular, shares of Wuliangye and Luzhou Laojiao both dropped more than 4% and are on the verge of a stronger decline in the past 5 trading days.
Last week, Securities Times reported that China’s market regulator met with members of the country’s white wine industry, causing the industry’s shares to then plunge.
According to Damon Zhang, assistant global equity portfolio manager at China Asset Management, attendees at the meeting revealed what officials were most interested in was “cooling down” a business. The market is overheated like the white wine market, be it focused on the hot growth problem or the Maotai wine price spike problem.
In a phone interview with CNBC, Damon Zhang said he expects white wine demand to remain “healthy” and that regulation will support the industry’s long-term growth. Although the anti-corruption campaign in 2012 and 2013 in China caused demand for white wine to decline, representatives of China Asset Management said that businesses and people still enjoy this wine as usual on occasions. Tet holiday like Lunar New Year.
Analysts at Swiss investment bank UBS maintained their buy rating on shares of Kweichow Moutai, Jiangsu Yanghe Brewery, Luzhou Laojiao, and Wuliangye Yibin in an August 23 report. “We believe that the efforts of distributors to hoard in the hope that white wine producers’ shares will increase in price has caused an unhealthy inventory situation,” UBS said.
UBS analysts said that the move of the Chinese authorities is aimed at preventing bullish speculation; while preventing further hoarding behavior by distributors.
Kweichow Moutai (Guizhou Maotai) and Wuliangye (Yu Liang Yi) are two of the five mainland Chinese stocks most invested by foreign institutional investors, including investors from Hong Kong. according to Wind Information.
However, In the past few weeks, foreign investors they have cut their investments in white wine stocks. As of August 25, there were only 96 foreign institutional investors holding Kweichow Moutai shares, compared with 101 at the end of July, according to Wind Information. The data also showed that the number of foreign financial institutions holding Wuliangye shares also fell to 91, from 98.
Previously, due to legal pressure from stricter regulations, shares of Chinese technology and education companies listed in Hong Kong all dropped sharply, causing the Hang Seng index to wipe out the results from the beginning. year on the trading day of July 26.
Significantly, shares of two technology groups Tencent and Alibaba fell 7.72% and 6.38%, respectively, while shares of food delivery “empire” Meituan “evaporated” up to 13.76%. The Hang Seng Tech Index – a group of shares of the 30 largest technology companies listed in Hong Kong – also fell 6.57% to 6,790.96 points.
Private education stocks also fell deeply as the Chinese government tightened regulations on this sector. Shares of New Oriental Education & Technology Group, Koolearn Technology, and China Beststudy Education Group all fell more than 30% suddenly.