Bloomberg News

Moutai Falls on China Military Banquet Curbs: Shanghai Mover

December 24, 2012

Kweichow Moutai Co. (600519), China’s biggest liquor maker by market value, fell the most in three weeks after authorities announced measures to rein in luxury spending by military officials.

Moutai fell 5.4 percent to 204.88 yuan as of 2:03 p.m. in Shanghai, headed for the biggest single-day drop since Dec. 3. China’s benchmark Shanghai Composite Index gained 0.3 percent.

The new rules for high-ranking military officials include bans on extravagant banquets and staying in civilian or military hotels with luxury perks, the official Xinhua News Agency reported on Dec 22. These regulations are part of a campaign by China’s leaders to reduce extravagance and bureaucracy among officials, Xinhua reported.

“Although the ban is a sweeping ban on most luxury spending, baijiu is probably the most visible and obvious product,” Wang Ping, a Shenzhen-based analyst at Great Wall Securities Co., said by phone today. “This will add pressure to the excess inventory problem already faced by baijiu makers such as Moutai.”

The city of Beijing also banned banquets for civilian officials visiting the Chinese capital on business and will instead provide buffet-style meals, Xinhua said in a separate report on Dec 22., citing the Communist Party’s Beijing Municipal Committee.

Other liquor makers also declined. Wuliangye Yibin Co. (000858), the second-largest baijiu liquor producer, fell as much as 4.7 percent in Shenzhen trading. Sichuan Swellfun Co. (600779), part-owned by Diageo Plc (DGE), dropped as much as 3.6 percent in Shanghai.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net


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