Mohnish Pabrai Labeled 'Ultimate Moat' Moutai Loses Top Stock Spot In China To ICBC Amid Plummeting Prices

Kweichow Moutai Co. is on the verge of losing its position as China’s most valuable onshore stock to Industrial and Commercial Bank of China Ltd. (ICBC) as the baijiu maker grapples with a significant drop in wholesale prices.

A 13% decline in Moutai’s share prices this year has led to a reduction in its market capitalization to 1.88 trillion yuan ($260 billion) as of Thursday’s close, narrowing its lead over China’s largest lender to just 26 billion yuan, reported Bloomberg.

ICBC, on the other hand, has seen a more than 15% increase in its share prices during the same period. Moutai’s poor stock performance is part of a broader trend of investor aversion towards premium brands as consumers tighten their spending.

Analysts at Bloomberg Intelligence, including Ada Li, have suggested that the recent all-time low for Moutai’s flagship product could indicate a prolonged wait for a full recovery in China’s consumer spending. Foreign investors have been offloading Moutai shares, with their ownership dropping to the lowest level since January.

Renowned investor Mohnish Pabrai has often praised Moutai for its strong competitive advantage. He said, “I can’t think of another company that has a better moat than Moutai.”

He referenced the company’s 1000-year old history and said the alcohol maker is “embedded in people’s head.”

Moutai’s recent struggles are a stark contrast to its performance during the pandemic. In 2020, the liquor giant managed to overtake the top spot by market cap, despite a worldwide slump in booze demand, by consistently raising retail prices. However, the current slump in wholesale prices, reflecting a tepid economic recovery, has raised concerns over the firm’s margins.

Meanwhile, ICBC, which faced a slump in 2020 due to the prospect of narrower margins as China cut borrowing costs, is now benefiting from regulators’ shareholder-friendly policies. High-dividend stocks, such as banks, have outperformed this year and have become an investor favorite amid ongoing market volatility.

Photo Courtesy: HunagnTwuai Via Wikimedia Commons

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This story was generated using Benzinga Neuro and edited by Shivdeep Dhaliwal