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Liquor giant Moutai poised to become China's biggest stock

[NEW YORK] Chinese liquor giant Kweichow Moutai is close to dethroning Industrial & Commercial Bank of China (ICBC) as the nation's biggest stock by market value.

The distiller, which makes baijiu out of sorghum and wheat from south-west China, saw its market capitalisation surpass that of ICBC during Friday trade before closing slightly lower at 1.808 trillion yuan (S$356.01 billion), versus ICBC's 1.813 trillion yuan as at 3.07pm in Hong Kong, where the bank's H shares were still trading. The distiller's stock closed up 1.9 per cent, hitting a fresh record high.

Moutai's rally is notable at a time distillers globally are grappling with restaurant shutdowns and curbs on social gatherings as a result of the coronavirus pandemic. Its ability to keep raising retail prices has encouraged investors and allowed the company's stock to keep rising. Its share price is the highest in China, closing Friday at 1,439 yuan apiece.

In contrast, ICBC has been weighed down by the prospect of narrower margins as China pushes for lower borrowing costs to bolster the pandemic-stricken economy. The company saw its slowest profit growth since 2018 in the first quarter, and the government this week called on the financial industry to sacrifice 1.5 trillion yuan of profit this year to support China's economy.

Moutai's steady rise looks modest compared to that of PetroChina, which became the world's first trillion-dollar firm in 2007 - before it tanked over the following 10 years. It lost about US$800 billion in market value in that time, as China moved away from a commodity-intensive development model and curbed the kind of speculative trading that helped drive up PetroChina's shares.

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Its Shanghai-listed stock has lost 60 per cent over the past 10 years, the worst performer in a gauge of Shanghai's 50 largest stocks, while Moutai has surged about 1,350 per cent to be among its best. The liquor maker, which is trading barely 1 per cent below the consensus target price, remains one of China's highest-rated stocks onshore with 89 per cent of analysts giving it a buy recommendation.

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