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Maotai gains from age of consumption
By Zhang Ran (China Daily)
Updated: 2007-01-22 11:05 In the Chinese stock market, as investment bankers implement their 2007 investment strategies, there is one sector in which they are all very positive: Consumption.
Take alcohol maker Kweichow Moutai Co Ltd, whose share price rose as much as 110 percent in 68 days since it resumed trading on October 9 after its share restructure reform. Last Monday, Moutai's shares broke 100 yuan (US$13) to rank as the most expensive stock among all the A-share companies. It's also the first time for a domestic listed company's share price to surpass 100 yuan since China conducted its share restructure reform in 2005. Moutai will not be the only shares rising from this investing trend in 2007. As the number of wage earners grows in China, the nation is embarking on an age of robust consumption. And analysts believe it's the "basic stuff" such as Moutai, or food, beverages and clothing that will show the steepest growth. The clearest focus in 2007 for China investors is not the banking sector, energy firms, or steel makers, but companies selling products to the domestic market. Investment bank Morgan Stanley points out in a research report that Chinese consumption has been, and will remain in the near future, a volume game. Merill Lynch, another global investment giant, agrees, claiming the nation's overall consumption growth is ready to take off unless growth in the United States slows sharply. Moutai is a prime example of a listed company in the consumer sector poised for growth. As the top brand among Chinese liquors, it has been continually moving up the "quality" ladder and relatively increasing its prices based on the fact that Chinese consumers are growing wealthier and more sophisticated in their buying habits. Statistics by Shanghai-based Wind Data shows Moutai ranks No 2 among all the domestic listed companies in attracting fund managers to hold its stock; over 53.32 percent of Moutai's tradable shares are held by fund managers. The price hike has helped Moutai enjoy 25 percent average annual net profit growth without losing its clients. Another consumer-driven firm set to win investors is Zhejiang China Commodities City Group Co Ltd. The group is the biggest trader of small commodities in the world. (For more biz stories, please visit Industries)
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