Foreign investors unwind holdings in Chinese liquor giant Kweichow Moutai, consumer stocks amid stretched valuations
- Global fund managers have sold 422 million yuan of Kweichow Moutai shares, 1.2 billion yuan in Wuliangye Yibin stock
- Buying into consumer stocks risky because of crowded trading, JPMorgan Asset Management says
Trade in shares of liquor distiller Kweichow Moutai and major rival Wuliangye Yibin is showing signs of retreat as foreign investors trim their holdings in overcrowded Chinese consumer stocks.
Global fund managers have sold a combined 422 million yuan (US$61.5 million) of Kweichow Moutai shares through the Stock Connect mechanism this month, while net selling of Wuliangye has totalled 1.2 billion yuan so far, according to the Hong Kong stock exchange. These fund managers were net buyers of these stocks last month.
Stretched valuations and hefty gains have spurred sales in the crowded consumer stocks sector, which is dominated by liquor shares.
“Adding consumer stocks now is pretty risky, given their current valuations,” said Zhu Chaoping, a strategist at JPMorgan Asset Management in Shanghai. “The trading in the sector is already very crowded.”
Kweichow Moutai, the world’s most valuable liquor distiller, and Wuliangye, however, are still trading at least 55 per cent above their seven-year averages following a surge of more than 60 per cent this year. A gauge tracking Chinese consumer stocks that is dominated by liquor producers has jumped by the similar margin to emerge as the best performing sector of 2019.
Both stocks also remain Chinese fund managers’ top holdings because of resistance to slowing growth.