Investor search for scarcity sends Wangfujing shares sky high as retailer wins duty-free franchise

Stock traders have been searching for scarcity to ride out the skittish outlook of an economy recovery that is being jeopardised by a possible fresh wave of coronavirus infections.

The tactic has put Wangfujing Group, a state-owned department store operator trading on the Shanghai Stock Exchange, in the spotlight recently. Shares of the Beijing-based retailer have jumped by threefold over the past two months, while the broader market remains languishing.

Wangfujing’s Wednesday statement well explained the staggering run in its share prices: it won a franchise licence from the finance ministry to start duty-free businesses. It was the first such licence granted by the Chinese government in almost four decades, making Wangfujing one of the eight companies with the franchise in the country.

Shares of Wangfujing surged by the 10 per cent daily cap for a fourth day to 36.44 yuan on Friday, defying an across-the-board sell-off in the Asia-Pacific region. Brokerages from CSC Financial to Essence Securities say the special license will boost the company’s profits significantly in coming years.

“The company will fully benefit from the development of the downtown duty-free business in Beijing,” said He Yanqing, an analyst at CSC Financial in Beijing. “It may even expand the market beyond Beijing to make the foray into the rest of the country.”