China's Top Media Attack Deals a 'One-Two Punch' to Market Cap Leader Maotai

Market Cap of $25 Billion Vaporizes Instantly Amid Corruption Reports

[Asia Economy Reporter Park Sun-mi] Guizhou Maotai (hereafter Maotai), the company with the largest market capitalization on the Chinese stock market, lost $25 billion at once as its stock price plummeted about 8% following a scathing corruption-related criticism by a government media outlet. Due to the perception of being a company stigmatized by the government, further stock price declines are inevitable, and there is a possibility that it may soon lose its position as the top company by market capitalization.

According to Bloomberg on the 17th, Maotai’s closing stock price on the Chinese stock market the previous day fell 7.90% to 1,614 yuan. Although it still holds the No. 1 spot in China with a market capitalization of $290 billion in dollar terms, the nearly 8% plunge in stock price in one day caused $25 billion of market capitalization to evaporate instantly.

The shock was even greater because the stock had been thriving despite the spread of COVID-19. Maotai’s stock price rose sharply even after the severe COVID-19 outbreak in February, with a year-to-date increase of 36%. In June this year, it even surpassed Industrial and Commercial Bank of China to claim the top spot in market capitalization, and on the 13th, it recorded its highest market capitalization of $319.9 billion.

The sudden plunge in Maotai’s stock price was largely influenced by the social networking service (SNS) platform ‘Xuexi Xiao Zu (學習小組)’ operated by the People’s Daily, the official newspaper of the Chinese Communist Party, which labeled Maotai as a company involved in corruption.

The post titled "Maotai with Changed Taste, Who Is Buying Maotai?" on ‘Xuexi Xiao Zu’ emphasized that Maotai is a company that grew through corruption and bribery culture, recalling that at least 13 Maotai executives have been investigated for corruption since former chairman Yuan Renguo was arrested last year on bribery charges.

It pointed out that many corruption cases in China frequently involved Maotai as a bribe, and that Maotai’s unique aroma and taste have been distorted into the taste of power. It also criticized the Maotai craze, noting that on the day Costco’s first store opened in Shanghai last year, people fought to buy discounted Maotai, and a promotion allowing airline passengers to purchase two bottles of Maotai at a discounted price led some people to fly more than 10 times a week. It condemned Maotai for degenerating from a drink into a financial investment tool.

Market analysts predict that further stock price declines for Maotai, which has been publicly stigmatized by the Communist Party’s official newspaper People’s Daily, are inevitable. After the recent sharp drop, the market capitalization gap with the second-ranked Industrial and Commercial Bank of China has narrowed to about $90 billion, and if the decline continues, Maotai risks losing its No. 1 market capitalization title. Chinese economic media Caixin recently analyzed that the Chinese government is closely monitoring the stock market rally and that the deliberate attack on Maotai, a symbol of soaring stock prices, is intended to suppress the speculative fever concentrated in the stock market.

This content was produced with the assistance of AI translation services.