China liquor giant tumbles as state media questions share surge

Shares in the world's most valuable distiller, China's Kweichow Moutai, tumbled four percent Friday after state media questioned whether the index heavyweight's skyrocketing stock price had risen too much, posing a risk to the overall market. Kweichow Moutai, which makes "baijiu", a fiery grain alcohol popular in China, has seen its share price double this year on good earnings and bullish market sentiment. Shares climbed more than four percent on Thursday to a record high close of 719.11 yuan, giving the firm a market capitalisation of more than 900 billion yuan, making it China's eighth most valuable listed company. But they fell as much as 5.7 percent on Friday, closing 4.01 percent lower at 690.25 yuan, after state mouthpiece Xinhua news agency published a piece saying the company's soaring stock price was not justified by its earnings. "It is as if Moutai is not selling liquor, but golden water," said the Xinhua article, a rare case of an individual company being singled out by state media. The report, issued late Thursday, blamed "shortsighted speculation" for the stock's rise. Moutai broadly concurred in a statement to the Shanghai stock exchange Friday morning that likely added to the shares' fall. The statement said some stock analysts had issued "overly-high target prices and valuations" that the company did not agree with. China's government is keenly sensitive to movements in the country's stock prices after markets tumbled more than 40 percent in a little over two months in 2015 and remained among the world's worst performers last year. Regulators have since sought to keep markets stable, but controlling the impulses of China's unpredictable investors remains a challenge, and the benchmark Shanghai index is up around 10 percent this year, boosted by solid economic growth. "The stability of its (Kweichow Moutai's) stock price influences not just its own market image and brand or the reasonable profits of investors," Xinhua said. "It also has a spillover effect. Pulling out one hair can affect the whole body of China's A-share market stability, especially stock prices in the Chinese baijiu and consumption sectors." Kweichow overtook London-based Diageo as the world’s most valuable liquor maker earlier this year, and now has a greater market capitalisation than such giants as China's Sinopec, the world’s biggest oil refiner.