Kweichow Moutai Co looks poised to lose its spot as China’s most valuable onshore stock to Industrial and Commercial Bank of China Ltd, as the baijiu maker grapples with tumbling wholesale prices.

A 13% slump in Moutai’s share prices this year has reduced its market capitalisation to 1.88 trillion yuan as of Thursday’s close, narrowing its gap with China’s biggest lender to just 26 billion yuan. ICBC rallied more than 15% during the period.

The liquor maker is seen as a barometer for consumer sentiment as its flagship baijiu drinks typically retail over 2,500 yuan a bottle. The slump in wholesale prices this year - a reflection of tepid economic recovery - has fanned concerns over the firm’s margins. The poor stock performance is part of a broader aversion by investors toward premium brands as consumers tighten their purse strings.   

The price for Moutai’s flagship product hit an all-time low this month, which could “signal a longer wait for a full recovery in China’s consumer spending,” Bloomberg Intelligence analysts including Ada Li wrote in a note this week. Foreigners have been offloading Moutai shares, with their ownership dropping to the lowest level since January. 

The fortunes of Moutai and ICBC are diverging once again after the liquor giant overtook the top spot by market cap in 2020. Back then, Moutai defied a worldwide slump in booze demand in the depths of the pandemic and managed to keep raising retail prices. 

Meanwhile, ICBC - whose slump in 2020 was triggered by the prospect of narrower margins as China cut borrowing costs - is now benefitting from regulators’ shareholder-friendly policies. High-dividend stocks, such as banks, have outperformed this year. The cohort has also become an investor favourite amid ongoing market volatility. 

  - Bloomberg