For Chinese Markets, Plunging Liquor No Match For RRR Cut, Trade Optimism

You know the macro backdrop must be favorable when Chinese equities manage to surge nearly 1.5% even as heavyweight Kweichow Moutai logs one of its worst days in a year.

Moutai – purveyor of sorghum liquor and the world’s most profitable distiller – said top and bottom line growth will be around 15% in 2019 and unveiled a revenue growth target of 10% for 2020. None of that is particularly encouraging. Net income of 40.5 billion yuan on 88.5 billion yuan in revenue for 2019 are well short of the 43 billion yuan and 90 billion yuan analysts were expecting.

Shares plunged nearly 6% at one juncture and closed down 4.5%. The 100-day moving average was breached. Some worry the disappointing numbers bode ill for the Chinese consumer at a time when jitters persist about domestic demand amid a historic slump in auto sales and lackluster imports, which recently snapped a six-month stretch in contraction.

But it made no difference to the broader market on a day when shares were digesting Wednesday’s announcement of another RRR cut, which, despite being telegraphed, came earlier than some expected (it goes into effect on January 6).

The CSI 300 posted a third straight gain, and the second move of 1% or more in three sessions. Seven stocks rose for every one that fell.

The Shanghai Composite managed to push through a key technical level if you’re the type who’s into arbitrary lines drawn on charts.

The CSI 300’s 7% gain in December was the best monthly rally in 10, and Thursday’s Caixin PMI, while coming in a bit shy of estimates, bolstered the notion that the world’s second-largest economy has stabilized.

Meanwhile, more protests (complete with tear gas and fires) weren’t enough to spoil the mood for the Hang Seng. Hong Kong shares rose 1.3% to kick off 2020.

The gauge sits at 6-month highs and volatility recently touched lows last seen during the halcyon days of the low vol. bubble in 2017.


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