Kweichow Moutai

Kweichow Moutai slumps after Xinhua warns shares are rising too fast

PUBLISHED : Friday, 17 November, 2017, 12:58pm
UPDATED : Friday, 17 November, 2017, 9:34pm

Kweichow Moutai, China’s biggest producer of liquor, tumbled the most in two years in Shanghai after state news agency Xinhua and the company both warned the shares were rising too fast.

The stock dropped as much as 5.8 per cent from a record high in morning trading on Friday, on course for its biggest decline since August 2015, before paring the loss to 3.9 per cent at 691 yuan.

Moutai’s share price has more than doubled this year, bringing it to the attention of state-run media. Xinhua published an article after the market closed yesterday saying short-term speculation would hurt value investment.

Kweichow Moutai also issued a statement to the stock exchange last night to warn investors against blind investment, urging them to make rational investments.

The warnings may force institutional investors to change their stock-pick strategy. Many have ploughed their funds into Kweichow Moutai and other large companies in different industries as the government’s deleveraging campaign has led to crowded trading in the nation’s blue-chip stocks.

Shares of Kweichow Moutai are valued at 28.9 times estimated 12-month earnings, the most expensive level in seven years, according to data compiled by Bloomberg. The CSI 300 Index of the most valuable 300 companies on the Shanghai and Shenzhen bourses is trading close to its priciest level in two years.

Investors have regained their appetite for the distiller’s stock as it recovered from President Xi Jinping’s anti-graft campaign which banned high-end alcoholic drinks at government banquets. Its third-quarter earnings growth accelerated to 138 per cent from 31 per cent in the previous three-month period.

The stock has a 12-month price target of 709 yuan, implying a 1.4 per cent decline from yesterday’s closing price, according to Bloomberg data. It has a buy rating from 26 analysts, a hold rating from two and no sell recommendations, the data showed.

A measure of consumer-staples stocks including liquor distillers retreated 2.6 per cent on Friday, with Wuliangye Yibin and Luzhou Laojiao shedding at least 3.9 per cent.