Moutai Falls Most Since China Bubble Burst on Alcohol Warning
(Bloomberg) -- Chinese liquor maker Kweichow Moutai Co. tumbled the most since the stock bubble burst in 2015 as investors worried about possible government measures to curb alcohol consumption.
Moutai slumped 7.4 percent at the close, one of the biggest laggards on the big-cap CSI 300 Index on Tuesday. Shares of the Guizhou-based firm slid after the Beijing News reported that a revision to a draft law contained a stronger warning against alcohol use than appeared in a previous version.
Chinese liquor shares fell earlier this month on speculation the government may raise taxes on some products. Investors had been turning to so-called defensive stocks like booze makers amid the China-U.S. trade dispute in the hope domestic consumption would offer some protection, but that strategy is falling apart. Since mid-June, Moutai is down 20 percent and a subgauge of consumer staples is one of the worst performers on the CSI 300.
The Beijing News report said China will step up education on the harmful effects of excessive drinking, citing the draft amendment that is being reviewed by the legislature. A previous version of the proposed law used the phrase "raise awareness on the harm of smoking and drinking." The government will use tax and pricing measures to control smoking, the newspaper said, citing the draft amendment.
The news also dragged down other liquor stocks on Tuesday, with Jiangsu Yanghe Brewery Joint-Stock Co. losing 9.6 percent and Luzhou Laojiao Co. tumbling 7.9 percent. A measure of consumer staples on the CSI 300 Index retreated 6 percent, the most since January 2016.
©2018 Bloomberg L.P.