Rocket fuel, for investors too


When John Phelan visited Beijing in 1986, the New York Stock Exchange boss was presented with a share certificate by Deng Xiaoping.

The issuer, Feilo Acoustic, was one of eight companies then allowed to sell shares to the public.

In January 1992, three months after trading started on the Shanghai Stock Exchange, the loudspeaker firm’s share price skyrocketed to Rmb3,550 a share. Another firm that made vacuum tubes saw its share price surge to Rmb2,587 shortly afterwards.

No other A-share firm had surpassed the stock prices of these (admittedly highly illiquid) stocks. But a landmark was reached this month when Kweichow Moutai crossed the Rmb1,000 per share threshold (Rmb100 a share is a rare enough feat for A-shares).

China’s best known liquor maker climbed to Rmb1,029.63 at one point on July 1, and brokerages were quick to celebrate “the first Rmb1,000 stock”. That claim was technically incorrect, given the 1992 price moves. But the value that Moutai has created is a lot more real: its market capitalisation is now more than Rmb1.26 trillion ($183 billion), or more than half the GDP of its home province Guizhou (historically one of the poorest parts of China).

Anyone daring to buy Moutai shares in early 2013 – a time of crisis for the company when Chinese leader Xi Jinping’s anti-corruption campaign was in full swing – will be sitting on a tenfold return. The upswing also means that Moutai is now the second most valuable A-share firm, behind only ICBC, the state-owned banking heavyweight.

Moutai’s share price has retreated about 2% since hitting the Rmb1,000 threshold. However, it remains a favourite with overseas shareholders, who have been impressed by its capacity to raise prices on the best of its baijiu brands year after year.

For a backgrounder on this premium alcoholic beverage see WiC455.

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