Mixue blazes ahead amid consumer stock boom

Staff reporter

Mixue Group's (2097) shares have doubled their offer price, alongside other Chinese consumption stocks shining on the extended optimism about China's boost to domestic demand.

But analysts warn a speculative mindset dominates the trading and investors should be cautious about the overvalued stocks.

The Chinese fruit tea giant Mixue surged as much as 10 percent yesterday to HK$434.2 apiece. It ended at HK$420.6 apiece, 7 percent higher than the previous close, with a full-day trading volume of nearly HK$1 billion.

Just eight days after the listing, Mixue saw its shares soar 107.7 percent from the offer price of HK$202.5 apiece and the market capitalization hit HK$158.6 billion. The firm already gained attention with the HK$1.82 trillion margin financing during the retail bookbuilding.

Meanwhile, hand-made gold jewelry seller Laopu Gold (6181) once rose as high as HK$702.5 despite the high gold prices, before ending 12.8 percent up at HK$693, the new high among closing prices.

Pop Mart International (9992) also leapt 6.7 percent to HK$119.6 apiece, after touching HK$120.4, only 0.5 percent lower than its historical peak of HK$121.

Mao Geping Cosmetics (1318) also advanced 13.3 percent to HK$104.3

China's emphasis on stimulating domestic consumption is a major driver, said Kenny Ng Lai-yin, securities strategist at Everbright Securities International, adding that economic goals for this year demonstrate the greater confidence of the policymakers.

In addition, the Hong Kong market is in an investment frenzy, said Dickie Wong, executive director of research at Kingston Financial Group. The benchmark Hang Seng Index had surged about 4,900 points or 26 percent from a trough on January 13, after it edged down 1 point to 23,782 points yesterday.

But for Mixue, Ng expects the ongoing hype is only for a short run as the speculators dominate the market.

Wong even sees a bubble taking shape. "People are waiting for Mixue to be added to the Stock Connect scheme," he said, adding that there may be a selloff shortly after the inclusion.

While Mixue's franchising-driven business model helps the chain stand out, Ng pointed out that the tea drinks market in the mainland and overseas is highly competitive and the story would be discredited when franchises cannot make a profit.

Mixue's peer Nayuki (2150) had projected a net loss of up to HK$970 million for last year, versus a net profit of HK$20.9 million one year ago.

For Laopu Gold, Ng said investors would suffer if gold prices suddenly slump.

No matter if its Mixue or Laopu, Wong doesn't believe that there will be a stock that's always rising.