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Shares in Kweichow Moutai, one of China’s most valuable businesses and whose premium spirit is sold for about $200 a half-litre bottle, jumped 6 per cent on Wednesday after it raised distributor prices for the first time in six years.
The company, which is synonymous with the strong grain-based liquor known as baijiu that was a favourite of the People’s Republic founder Mao Zedong, announced a 20 per cent increase in the price of its flagship product to Rmb1,169 ($160).
Steeped in domestic folklore and widely seen as a proxy for China’s vast consumer market, Moutai’s drink is a fixture at toasts in official and informal gatherings across the country and has helped the company emerge over the past decade as the world’s most valuable alcohol producer.
Its market capitalisation of more than Rmb2tn is the second highest in China, behind tech group Tencent, and it has for years been a core component of foreign exposure to the country.
The unexpected move, which is aimed at distributors rather than retail customers, was rare positive news for the domestic stock market, which has struggled to gain traction this year. Disappointing economic data, alongside worsening geopolitical relations with the US, have weighed heavily on sentiment.
The CSI 300 index of Shanghai- and Shenzhen-listed stocks is down more than 8 per cent so far this year, while a widely anticipated consumer rebound from the end of Covid-19 restrictions in January has failed fully to materialise.
Analysts at Citi said the move meant Moutai was “taking back some of distributors’ lucrative profits . . . for the benefit of shareholders”, resulting in “significantly increased profit growth in 2024”. They added that Moutai was a “core holding” in China’s consumer sector amid what they described as an “uncertain macro environment”.
Andy Maynard, managing director at China Renaissance Securities, a brokerage in Hong Kong, said foreign holdings of the stock had fallen significantly compared with two years ago, when its value peaked at Rmb2.6tn, and pointed to “stark differences” in sentiment.
“The majority of foreigners that run global money, it still won’t be a big enough catalyst for them to come back and enter because the negative macro picture of China Inc is too big relative to the rest of the world,” he said of Moutai’s price increase.
Recent economic data in China showed retail sales rose 5.5 per cent year on year in the third quarter, beating expectations. The Chinese economy slipped into deflationary territory in July, and consumer prices remained flat year on year in September.
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