Shares in Chinese liquor companies slump

Liquor companies are also taking a beating in the markets. Ever since the plasticiser incident - where toxic quantities of the chemical were found in an array of Chinese baijiu, including market leader Moutai - it's gone from bad to worse.

Liquor stocks were once considered a safe haven for Chinese investor, but their heyday seems to be over. Valuations of listed liquor companies have dipped to record lows, their share prices are also continuing the slide.

Zhou Xuesong, senior investment advisor of CITIC Securities"In the short term, the impact from the negative headlines will continue, the liquor industry will remain relatively weak in the stock market."

The price limit on high-end liquor including Maotai is worsening the condition of liquor companies. Since 2003, despite increased output, liquor producers have created an illusion of a supply shortage through hiking prices and controlling supply. Industry insiders say such measures are no longer in play. But the damage is already done. The stocks of listed high-end liquormakers have become risky in the short term.

Xu Lei, analyst of Hongyuan Securities, said,"The price limit will cause a slump in liquor demand. So I think it will hurt liquor stocks as well as the industry's development."

Zhou Xuesong said,"Investors should avoid alcohol stocks in the near future, but from a longer-term perspective, high-end liquor is worth the investment. After liquor share prices have been sluggish for a long time, it would be a good time to buy in. "

Stock exchange data reveals that the net outflows for major liquor brand funds have increased, and their stock prices have declined significantly.