The US Has FANG, China Has A Booze Company
By Cahterine Ngai, Bloomberg reporter and commentator
China’s equity market is increasingly dominated by just one stock, and that makes gains in its benchmarks look precarious.
Liquor maker Kweichow Moutai has surged 20% this year to be worth $461 billion, in large part because mutual funds will lag rivals and lose clients if they don’t own it.
Moutai is now the 12th-largest listed company in the world. For comparison, that’s about twice as valuable as Diageo and Anheuser-Busch InBev combined. The stock accounts for 64% of the Shanghai Composite Index’s gain this year, up from 21% of its advance over the past 12 months.
As well as betting that a stick-with-your-winners momentum trade will continue to be successful, investors are counting on what appears to be an implicit endorsement from Beijing.
That can be risky: last year, the stock tumbled as much as 8.4% after the influential People’s Daily criticized the high price of Moutai’s liquor. Back in November 2017, the state-run Xinhua News Agency said Moutai shares were rising too fast. The report triggered a plunge in the stock and a broader selloff. As illustration of the company’s rising profile, check out this rap video.
Tue, 02/09/2021 – 22:45