Kweichow’s stellar stock market run signals success of nation’s economic transition

Shares of China’s famed premium liquor maker Kweichow Moutai hit an all- time high of 501.1 yuan ($ 75.05) in Tuesday trading, cementing its position as the most expensive stock in the Chinese mainland and more importantly attesting to the power of the nation’s mammoth consumer market.

For companies that make the effort to attract them, the enormous buying power of Chinese consumers can be a driving force of earnings and stock prices. The company’s performance also suggests enterprises will survive and develop amid the government’s crackdown on corruption if they can truly win the hearts of consumer.

Shanghai- listed Kweichow Moutai edged down 0.77 percent to 495.97 yuan at the close of the market on Tuesday after reaching a new record high during the day. Its shares have gained more than 61 percent over the past year, far outstripping the rise of less than 8 percent in the benchmark Shanghai Composite Index.

It has even edged out global liquor giant Diageo, owner of the Johnnie Walker brand, as the world’s most valuable distiller.

Demonstrating the liquor maker’s coveted position in the A- share market, its market capitalization amounted to 623.04 billion yuan at the close on Tuesday, equal to more than half of the GDP of Southwest China’s Guizhou Province, where it is based. The province’s GDP totaled 1.17 trillion yuan in 2016, according to official data.

Of course, activity in China’s stock market is often driven by speculation and if the shares go any higher, they are likely to move into bubble territory. Just consider, for example, that the distiller has been well ahead of China’s technology stocks, a sector that in many other markets has consistently outperformed.

Concerns over whether the stock is overbought, nevertheless, don’t negate the reality that the distiller of the famed fiery liquor, which was hardhit by the country’s anti- graft campaign in recent years, has successfully remade itself as an affordable luxury brand.

The shift to the mass market has taken advantage of increasingly affluent Chinese consumers’ newfound love of, and confidence in the quality of, domestic products. Those trends are underpinning Kweichow Moutai’s stellar stock market run.

The premier liquor maker has undisputedly caught the fancy of mainland stock investors, and its performance offers clues to the growing influence of consumption on the Chinese economy. It also undermines any claims that the country’s unprecedented anti- corruption campaign will have a long- term effect on the economy.