Hong Kong beverage maker Vitasoy slumps by most in 15 months as leaked memo fans controversy and costs investors US$475 million

·4-min read

Vitasoy International, the Hong Kong-based beverage maker, slumped by the most in 15 months following a public backlash triggered by an internal memo seen as sympathetic to an employee described by police as a “lone-wolf domestic terrorist.”

The stock plunged 12 per cent to HK$25.95 in Monday trading and completed its worst single-day loss since March 30 last year. The stock is among those eligible for trading by onshore investors through the Stock Connect scheme, which suggests nationalism may be behind the sell-off that erased US$475 million from its market value.

The firm, which derived two-thirds of its annual turnover last year from the sale of soybean milk, tea and fruit juices in mainland China, is the latest locally-listed firm to be embroiled in political turmoil tied to national security and trade, following recent issues related to Xinjiang-produced cotton and the supply of solar-panel materials.

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In the leaked Vitasoy memo that went viral on the internet last week, the company expressed its condolences to the family of a 50-year-old purchasing manager identified only as Leung, who stabbed a police officer in Causeway Bay on July 1, before killing himself.

The day was a double celebration marking the 24th anniversary of the city’s handover and the Chinese Communist Party’s centenary. Hong Kong’s police has described the act as lone-wolf terrorism.

The violence follows a year in which Beijing has tightened its control over Hong Kong, squelching anti-government protests with the fearsome national security legislation and stamping out political dissent. It has also snared Jimmy Lai Chee-ying, the founder of Apple Daily publisher Next Digital, and scores of opposition politicians.

Vitasoy first issued a statement to clarify that the memo was written by a staff member without official consent and could not represent the company’s views. In subsequent statements, it apologised for the troubles, reserved the rights to pursue the case against the staff member, and condemned violence or acts that harm the city.

Hu Xijin, chief editor of Global Times. Photo: Simon Song
Hu Xijin, chief editor of Global Times. Photo: Simon Song

Hu Xijin, the chief editor of Global Times, said Vitasoy shifted its position under pressure from mainland public opinion. It indicates that Hong Kong society‘s efforts were insufficient in reshaping the city’s public opinion and social ecology, adding that mainland support is indispensable under the one country, two systems formula.

Monday’s stock sell-off suggests the firm has failed to appease mainlanders as some internet users called for a boycott of Vitasoy products. Actors Gong Jun and Ren Jialun, popular among Chinese youth, both said they would suspend commercial ties with the Hong Kong drink manufacturer.

In the July 1 incident, a police investigation showed that Leung bore hatred towards the police and the city’s national security law, and concluded that the attack was premeditated based on his suicide notes. Hong Kong’s Secretary for Security Chris Tang Ping-keung has warned against promoting or cheering violent acts.

Vitasoy shares have lost all the gains made this year since the scandal broke out last week. The stock has declined 14 per cent in 2021, underperforming a 3.4 per cent advance on the Hang Seng Index.

Chinese nationalism has emerged as an important investment theme this year. They have boosted the shares of domestic apparel makers such as Li Ning and Anta Sports Products, after consumers switched to home-grown brands following a boycott by global competitors such as H&M and Nike of Xinjiang cotton for allegedly using forced labour.

They were also credited with boosting the shares of Xinjiang-based solar-panel makers last month, after the Joe Biden administration banned imports of materials from producers in the region, citing the same allegation, which China has rejected as an attempt to smear its companies.

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