Kweichow Moutai Initiates Stock Repurchase to Counter Weak Consumer Spending in China

Stock Buyback Amid Weak Consumer Spending

In a significant move, Kweichow Moutai, the leading Chinese liquor giant, has announced its first-ever stock buyback plan aimed at counteracting the effects of weak consumer spending across the nation. This decision comes as the company faces tepid sales, particularly ahead of the National Day and Mid-Autumn Festival.

Details of the Buyback Plan

• Investment Plan: The company intends to invest between 3 billion yuan (US$425.4 million) to 6 billion yuan for the repurchase.
• Impact on Shares: This strategy could potentially reduce registered capital as acquired shares will be canceled.
• Market Context: Kweichow Moutai's flagship liquor, Flying Fairy, has seen a 30% decline in prices over the past year.

Market Sentiment and Challenges

Analyst Wei Hongmei of Dongguan Securities notes that confidence in the liquor market remains weak, particularly as Kweichow Moutai shares reached their lowest value since April. Sales volume of popular mooncakes for the Mid-Autumn Festival has also decreased, indicating a broader trend of weak consumer spending.

Additionally, retail sales growth has slowed, highlighting the impact of fragile recovery in consumer demand. UBS Group has even downgraded the company's stock due to these challenges. Kweichow Moutai’s buyback plan is viewed as a strategic move to bolster investor confidence and address competitive pressures from market fluctuations.