Liquor Names Drag China Stocks Lower, Tech Weighs in Hong Kong

  • Moutai, Wuliangye biggest drags on CSI 300 after recent surge
  • In Hong Kong, a gauge of tech stocks closes at a record low

Chinese stocks dropped on Wednesday, with liquor makers driving the declines following a recent rally on the back of price hikes.

The benchmark CSI 300 Index fell 1.5%, the most since Dec. 20, leading losses in Asia amid thin year-end liquidity. A sub-index of consumer staples slumped 4% in its biggest drop since mid-October as baijiu distillers Kweichow Moutai Co. and Wuliangye Yibin Co. plunged more than 4% each.

Meanwhile, the Hang Seng Tech Index slid 1.8% in Hong Kong to the lowest close since its inception in July 2020, showing that investor sentiment toward the battered sector remains weak. The benchmark Hang Seng Index ended 0.8% lower, snapping a five-day winning streak.

Jolted by Beijing’s wide-ranging crackdown on private enterprise, debt troubles in the property sector and China’s economic slowdown, the CSI 300 has lost more than 6% in 2021 after a strong two-year rally. In the offshore market, a rout in Internet giants has seen the HSI measure tumble more than 15% to head for its worst annual showing since 2011. The MSCI Asia Pacific Index is down less than 4%.

“Today the drop is mostly contributed by some blue chips, in particular the baijiu names. It’s likely that some funds want to cash out before the year-end after the recent rebound,” Zhang Gang, a strategist at Central China Securities Co., said of China equities. “Also, China Mobile Ltd. is listing in the A-share market soon and there might be some worries in the market about liquidity tightness.”

Alcohol maker Luzhou Laojiao Co. tumbled 6.8%. The firm hiked prices for its 60-year-old wine, according to a China Securities Journal article.

It’s the typical “sell on good news” as speculation about price hikes has been driving the sector of late, said Steven Leung, executive director at UOB Kay Hian (Hong Kong) Ltd.

China’s central bank added more cash to the financial system in the past two days to ease a seasonal liquidity crunch. The People’s Bank of China cut banks’ reserve requirement ratio earlier this month and analysts say they expect further policy easing to counter the economic slowdown.

Source: Bloomberg

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