Shanghai index down 0.49% as distilleries tumble

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SHANGHAI stocks declined again today, sending the key index to a six-day low, as distilleries tumbled on news that China's top liquor maker recorded a slower earnings growth last year.

The Shanghai Composite Index fell 0.49 percent to 2,291.30, down 1.1 percent this week. Daily turnover was 80.3 billion yuan (US$13 billion).

In a filing to the Shanghai Stock Exchange late yesterday, Kweichow Moutai, China's biggest liquor producer by market value, said its net profit may have increased only 50 percent last year, down from 71 percent in 2011 and 59 percent in the first three quarters of 2012.

Moutai suffered a setback last month when the media exposed that its liquor contained excessive levels of plasticizer. The government efforts to ban lavish banquets in official receptions also dented the company's sales.

"China's high-end liquors face a grim future because the government is reining in excessive public spending. Weak demand due to a sluggish economy also erodes their profitability," BOC International (China) Ltd said in a report today.

The price of Moutai liquor have been declining since the company removed minimum prices for distributors following an anti-monopoly investigation by the National Development and Reform Commission.

Shenyin & Wanguo Securities expects the wholesale price of Moutai's liquor to fall to 1,000 yuan or 1,100 yuan per bottle after the Spring Festival.

Shares of Kweichow Moutai Co dropped 3.5 percent to 189.05 yuan. Sichuan Tuopai Shede Wine Co slumped 3.8 percent to 26.16 yuan. Shanxi Xinghuacun Fen Wine Factory Co declined 5.4 percent to 37.55 yuan.

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