Moutai’s $85 Billion Rout Sends Signal for China’s Stock Market

moutais 85 billion rout sends signal for chinas stock market

(Bloomberg) — Kweichow Moutai Co. investors are selling their shares at the fastest pace in more than two years, a warning for a market that owes much of its rally to a handful of large caps.

The biggest stock listed in mainland China has lost $85 billion since onshore markets reopened after the Lunar New Year holiday. Wednesday’s 6.2% drop takes the five-day decline to 17%, the biggest for such a period since October 2018. Moutai had rallied 30% this year through its Feb. 10 record close.

Momentum trades are cracking after the CSI 300 Index briefly surpassed its 2007 closing peak. Chinese traders were griping about a lack of market breadth before the holiday and extreme valuations for some of the most-loved stocks. Less than 10 companies accounted for half of the returns on the benchmark — including Moutai — with foreign investors and domestic mutual funds compounding the problem by buying the most liquid megacaps.

“This is the beginning of the end for baijiu’s outrageous valuations and the mark of a massive shift to value stocks,” said Dong Baozhen, fund manager at Beijing Lingtongshengtai Asset Management. The big baijiu gains the past year “have become a prisoner’s dilemma – whoever sells first wins.”

Triggers for the reversal include signals on tighter monetary policy from the central bank…

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