China Stock Pickers Winning Big With Liquor and Pork in 2019

(Bloomberg) -- In another wild year for Chinese stocks, there have been eye-popping gains for some and painful slumps for others.

Liquor makers and pork producers are among the best performers in 2019, while one of the country’s biggest drugmakers had a record monthly loss after an accounting scandal. In Hong Kong, early holders of smartphone maker Xiaomi Corp. exited after a lockup period expired.

After beating every other market in the world at the start of the year, Chinese stocks soured as trade tension with the U.S. escalated. Volumes are down and the country’s first bull market of 2019 came to an end after only 69 days. The Shanghai Composite Index, while still up 20%, can’t hold above the key 3,000-point level. The measure hit 3,011.54 on Thursday but closed at 2,996.79.

Here’s a look at some of the best (and worst) stock picks of this year.

The Winners

Kweichow Moutai Co.: Up 69% year-to-date
Investors love the world’s most valuable distiller as China’s middle class continues to splurge on its baijiu white liquor. Sales have climbed this year despite a slowing economy. That helped Moutai breach the 1,000 yuan ($145) milestone on Thursday, though it closed slightly lower at 996.35 yuan, still a record high. Two other spirits stocks, Wuliangye Yibin Co. and Luzhou Laojiao Co. are among the best performers on the CSI 300 Index.

New Hope Liuhe Co.: Up 138% year-to-date
The spread of African swine fever is wiping out pigs in China at an alarming rate. So how have investors responded? By buying shares of meat processors and feed stocks on expectations pork prices will jump. That has given New Hope Liuhe a shot at its best year in more than a decade.

JL Mag Rare-Earth Co.: 183% gain in May
This stock went on a tear after Chinese President Xi Jinping toured its facilities, stoking speculation the country could use its dominance in the rare earths industry as a weapon in the trade dispute. JL MAG makes magnets containing rare earths that are used in products including electric vehicles and wind turbines.

CSC Financial Co.: Up 153% in Shanghai this year
This brokerage was among several that surged at the start of 2019 as investors bet the broader rally would boost their profits. The good times for CSC pretty much ended on March 8, when Citic Securities Co. issued a sell rating for an insurer that had been a poster child for the broader rally.

Eastern Communications Co.: 224% over five weeks
For a while this year, any stock that could possibly be linked to the roll-out of next generation wireless technology surged. State media hyping “the dawn of the 5G era” certainly helped. Things got so out of hand that Eastern Communications had to issue statements roughly once a week to tell investors that 5G was only a small part of its business. The stock has since pared its gain this year to around 100%.

The Losers

Kangmei Pharmaceutical Co.: 56% tumble in May
The maker of traditional Chinese medicines handed investors a few shocks this year, but perhaps the biggest was this one: the admission it overstated its cash holdings by $4.3 billion using false documents and transaction records. One securities lawyer said that figure was unprecedented in China.

Xiaomi Corp.: $6.2 billion in market value vanished in three sessions
The tech company’s shares were bashed over a three-day period in January as investors rushed to sell when a six-month lockup period following its debut expired. The stock is down more than 40% from its listing price.

Visual China Group Co.: Lost $789 million in value in three days
How does a company in China infuriate investors so much they send the stock tumbling by the 10% daily limit for three straight days? By claiming to have a copyright on photographs of the nation’s flag and charging for their use. Visual China was apparently also trying to sell the first-ever photos of a black hole.

Kangde Xin Composite Material Group Co.: Two monthly drops of more than 40%
This maker of laminating film has troubles dating back to last year, when regulators started looking into its information disclosures. Things took a turn for the worse in January when it defaulted on a bond even though it had earlier reported cash levels sufficient to pay the debt 15 times over.

Ofilm Group Co.: 45% drop in three weeks
This smartphone component supplier to Huawei Technologies Co. and Apple Inc. got off to a good start to the year. Then on April 26 it said a 1.84 billion yuan profit for 2018 would actually be a 519 million yuan loss. Last month Morgan Stanley slashed its price target by a whopping 64%, citing earnings uncertainty.

To contact Bloomberg News staff for this story: April Ma in Beijing at ama112@bloomberg.net;Mengchen Lu in Shanghai at mlu157@bloomberg.net;Ludi Wang in Shanghai at lwang191@bloomberg.net

To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, Philip Glamann, Will Davies

©2019 Bloomberg L.P.

With assistance from Bloomberg