Moutai moves to boost investors' confidence

Kweichow Moutai Group, the major shareholder of Shanghai-listed Kweichow Moutai Co (Moutai). purchased shares of Moutai Tuesday, according to a company filing on the Shanghai bourse Wednesday, a move intended to recover investors' confidence in the premium Chinese liquor maker.

Moutai shares plunged by the maximum daily limit of 10 percent in Shanghai on Monday after the company reported a small increase in first-half net profit, as central government cuts on official spending on banquets weighed on the high-end liquor industry.

According to the Moutai announcement, the group purchased 406,773 shares Tuesday, which accounts for 0.0392 percent of its total shares.

Showing confidence in the future development of the liquor maker, the group will continue to purchase shares of Moutai in the next six months, said the announcement.

The share price of Moutai closed at 152.10 yuan ($24.93) Wednesday, up 0.29 percent.

"The plunge on Monday was influenced by the half-year results," Yang Qingshan, excecutive president at the China Brand Strategy Association, told the Global Times Wednesday.

Moutai reported a profit of 7.25 billion yuan for the first half of 2013, a year-on-year increase of 3.61 percent, according to the half-year report released on August 31, the lowest growth since the company got listed on the Shanghai Stock Exchange in 2001.

Moutai achieved a 42.56 percent year-on-year profit growth in the first half of 2012.

Yang said that compared with the usual double-digit growth, the growth of the first half was so low this year, which has been the major reason that triggered a plunge in the share price.

Wuliangye Group Co, another high-end Chinese liquor maker, reported about 5.79 billion yuan profit, up 14.76 percent year-on-year in the first half of this year, compared with 50.07 percent year-on-year growth in the first half of 2012.

Eight out of 13 listed Chinese liquor companies suffered a decline in year-on-year profit growth, according to their semi-annual reports.

The market value of the 13 listed liquor makers declined by about 59.8 billion yuan since the beginning of July, Securities Daily reported Wednesday.

The central government's control on official spending on banquets and presents has hit the liquor industry, Shu Guohua, an independent expert on liquor marketing, told the Global Times Wednesday.

About 40 percent of high-end Moutai liquor is purchased with government money, according to Shu.

Moreover, as it will take about two years for the economic slowdown to show on the performance of the Chinese liquor industry, so the financial reports of next year may be more negative, Shu told the Global Times,.

However, Yang holds a different opinion about the future prospects.

"The period from now to February 2014 will be a boom season for Chinese liquor consumption due to many festivals, including Mid-Autumn festival, National Day, New Year's Day and Spring Festival," Yang said, noting that the liquor industry may perform better in next several months.