Drink a baijiu toast to the new year. China’s consumer staples stocks, led by makers of the fiery Chinese liquor, are helping drive stock gains this year as sales prospects get rosier. As China’s markets endured a year of turmoil amid concerns over the economic outlook, consumer staples was the only sector on the country’s key stocks exchanges with positive returns last year. Those businesses, which sell things for daily use, surged with average revenue in fiscal 2017 forecast to grow three times as quickly as their global peers…Full Article: ECNS.cn Jan 2017

Key Points

  • In 2017, Fujian Sunner Development’s (SHE:002299) revenue is forecasted to increase by 32% while COFCO Xinjiang Tunhe’s, subsidiary of COFCO Group (SHA:600737), sales are forecasted to rise 23%. The 17 Chinese consume staple companies on the CSI 300 Index are forecasted to have an average revenue growth of 16%. The forecasted rise in revenue and sales is being attributed to declining domestic corn prices.
  • In 2016, 17 Chinese consumer staple companies traded on Shanghai’s and Shenzhen’s CSI 300 Index netted total investment (CNY) returns of 11%. At the same time, the MSCI World Consumer Staples Index (USD) dropped 0.4%. The 17 Chinese companies on the CSI 300 Index are forecasted to have an average revenue growth of 16% in 2017.

ChinaAg Comments

  • In July 2016, Kweichow Moutai (liquor producer) saw its share price increase to its highest level (CNY 317.19 or US$47.41) since the company started trading on Shanghai Stock Exchange in 2001.
  • In January 2016, e-commerce liquor retailer VipShop was found selling fake Moutai liquor. As a result, Vipshop stated it would suspend its liquor sales, including Moutai (~CNY 1,000 or US$150 per bottle).
  • In 2015, the price for a 500ml bottle of Moutai 53-degree liquor (the company’s primary product) dropped to CNY 1,000 (~US$161) per 500ml bottle, while in 2012 a Kweichow Moutai 53-degree bottle sold for CNY 2,000 (~US$316).
  • In December 2015, a liquor counterfeiter was sentenced to 5 years in prison in Guangxi Region. The counterfeiter re-filled high-end liquor bottle brands with cheaper alcohol and primarily distributed them in Beihai City, Guangxi region.
  • From June 12 to July 8 2015, Shanghai’s SSE Composite Index dropped -32.1%, while Shenzhen’s SZSE Composite Index declined by -40% due in part to substantial losses in Shenzhen’s NASDAQ type ChiNext board. Hong Kong’s Hang Seng Index, which is more open to foreign investors than its mainland counterparts, declined by only -13.8%. Lastly, the CSI 300 Index, an economic bellwether and China’s answer to the USA’s Standard & Poor’s 500, notched a -31.3% drop.
  • In August 2014, Kweichow Moutai announced forming a joint venture with Yonghui Superstores and Shenzhen Guomaoyuan Commerce and Trade Co Ltd. Through the JV, Moutai would sell its liquor in Yonghui supermarkets. The profit breakdown would be 60% for Moutai and 20% each for Yonghui and Shenzhen Guomaoyuan.
  • In February 2013, China’s NDRC (National Development and Reform Commission) fined Kweichow Moutai CNY 247 million (US$39.5 million) due to price fixing.
  • In January 2013, the NDRC and Price Bureau in Guizhou Province investigated Kweichow Moutai in accordance with China’s 2008 Anti-monopoly law. Moutai was forcing distributors to sell at high prices
  • In November 2012, Chinese product safety officials found excessive levels of plasticizers in a sample baijiu liquor that was manufactured by Jiugui Liquor Co.
  • Launched in 1999, the MSCI World Consumer Staples Index is comprised of 23 ‘Developed Markets’ including Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the USA. The index takes into consideration packaged food/meats, tobacco, household products, soft drinks, retail (supermarkets and hypermarkets), and more.

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