Kweichow Moutai shares close in on 1,000 yuan markBusiness | 4 Apr 2019 11:04 am
China’s booming equity market is getting closer to featuring its first 1,000 yuan stock.
Four analysts tracked by Bloomberg predict liquor giant Kweichow Moutai Co will get there within the next 12 months.
The shares have rallied 44 percent this year, helped by a surge in sales that defied concern of a consumer slowdown. The stock gained to 854.79 yuan (US$127) today.
Companies around the world often split their shares when prices get too high, a way to boost holdings by individuals and ensure liquidity remains sufficient. But in China, a high-turnover market that’s dominated by day traders, that’s rarely been a problem for its largest and most popular stocks. About 4.5 million Moutai shares changed hands daily this year on average, even though investors must buy them in multiples of 100.
“It’s essentially an issue of market liquidity and investor structure,” said Kinger Lau, Goldman Sachs Group Inc.’s chief equity strategist in Hong Kong. “For a big-cap stock and a foreigner favorite, I’d say the impact would be quite small. China’s A-share market has always been one of ample liquidity.” Stock splits are rare in China and mostly occurred in the 1990s, according to data tracked by Bloomberg. A Moutai representative did not immediately return a call seeking comment on whether the company plans to split its stock.
Moutai has previously spurred debate around whether a stock that costs 1,000 yuan could be a problem for traders.
When it was nearing 800 yuan early last year, local media reported that the Shanghai exchange was testing its systems to ensure there would be no technical glitches.
A spokesperson for the exchange did not immediately reply to a request for comment on whether such tests have been conducted this time. Moutai has long been a favorite of foreign investors. They have poured about 12 billion yuan into the stock this year through March via the trading links with Hong Kong, according to data compiled by Bloomberg.
Foreign trading accounted for an average of 36 percent of its daily turnover in the past month. Changchun High & New Technology Industry (Group) Inc. is China’s second-highest priced stock, closing at 309.29 yuan on Wednesday.
Analysts at Goldman Sachs, Macquarie Group Ltd., Citic Securities Co. and China Securities Finance Corp. all have a target price of at least 1,000 yuan for Moutai. At 1,016 yuan, Goldman’s target would make Moutai the fifth highest-priced stock in the world outside the U.S., according to Bloomberg calculations based on shares where daily volume is at least a million.