Kweichow Moutai surpasses Shenzhen economy as meteoric rise sparks bubble concerns in China’s stock market

China’s biggest company has a market value that exceeded the 2019 gross domestic product of Shenzhen, China’s third richest city

The meteoric rise of Kweichow Moutai may be an early sign of froth since mainland A share market surpassed US$10 trillion last quarter

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Moutai liquor on store shelf in Beijing. The maker fiery baijiu from Guizhou province is expected to be worth more than the size of Shenzhen economy in 2021. Photo: Shutterstock Images

Published: 4:45pm, 12 Jan 2021Updated: 10:47pm, 12 Jan 2021

Corrected [5:11pm, 12 Jan, 2021]

[5:11pm, 12 Jan, 2021]
Corrects spelling of Deng Xiaoping in headline and fourth paragraph

China’s biggest liquor distiller Kweichow Moutai surpassed the nation’s biggest lender last year when its stock surged to an all-time high. With some analysts overwhelmingly bullish on its earnings power, the company is set to eclipse the size of Shenzhen’s economy later this year.

The stock rose 2.9 per cent to a record of 2,160.90 yuan at the close on Tuesday. It has risen 8.2 per cent in the new year, enhancing its ranking as the world’s most valuable liquor producer at 2.71 trillion yuan (US$419.1 billion). The Shanghai Composite Index has risen 3.9 per cent since December 31.

That capitalisation has already exceeded Shenzhen’s gross domestic product (GDP) of 2.69 trillion yuan in 2019. If some of the more bullish analysts are right, the maker of Mao Zedong’s favourite tipple will, at some point this year, be larger than the GDP of Shenzhen, the richest of 11 cities within the Greater Bay Area.

That would be a testament to China’s market economy reforms, ironically in the same test-bed city hand-picked by Deng Xiaoping four decades ago. The mainland A share market last year surged past US$10 trillion in total capitalisation, the peak last seen in 2015 before its subsequent crash, and stoking bubble concerns.

Kweichow Moutai has “highly secured outlook on its production and expansion of direct sales,” said Ouyang Yujian, an analyst at Chuancai Securities in Shanghai. “The company is expected to be able to achieve double-digit growth in revenue in the next few years.”

The distiller based in southwestern Guizhou province, the most actively traded stock and fancied by domestic institutional funds, trounced Industrial and Commercial Bank of China last year as the biggest stock on the mainland’s exchanges, following a 69 per cent run-up. There are 46 buy calls and two sells on the stock, according to data compiled by Bloomberg.

A report issued by China International Capital Corp this month said that Kweichow Moutai market cap will probably reach 3.3 trillion yuan sometime in 2021, easily outpacing Shenzhen’s estimated GDP of 2.8 trillion yuan for 2020.

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