Maotai Millions

BY LEE HAN SHIH
Dec 12, 2008
*Special to asia!

An old man in the ancient city of Nanjing has become a multi-millionaire by punting on just one stock — Guizhou Maotai.

 

In January, the share price of the listed white wine brewery shot past 100 yuan, the fourth company on the Chinese stock exchanges to have achieved this landmark.

maotai

 

Stockmarket champ: Maotai

Maotai, distilled from fermented sorghum in the western province of Guizhou, with as much as 53% alcohol content, is famous as the drink served by Mao Zedong to US President Richard Nixon at the two’s historic meeting in 1972. It is one of China’s official banquet wines and, together with whisky and cognac, claims to be one of the three most well-known liquors in the world.

Nanjing, the ancient capital of China, has a strong relationship with Maotai — the people there seldom drink it, but they love the shares of Guizhou Maotai. Many punt it and some have held on to the shares since the counter went public in 2001.

It is one of these fans of Maotai who has become an extremely rich man when, in January, the share price of Guizhou Maotai soared. The old man, who takes a crowded bus to his broker’s office and plays the share market every day, is said to be in his 70s. He had been an ardent supporter of the company almost from Day One. Soon after its listing, he spent more than 10 million yuan snapping up 400,000 shares, then trading at between 30 and 40 yuan. And he has held them through thick or thin, and benefitted from Guizhou Maotai’s five share splits. Brokers, who refuse to disclose the man’s identity for fear of his safety — he still lives in the same old rundown home he has occupied for decades — say the old man would dismiss all talk of selling the shares.

"Last February (2006), when Guizhou Maotai’s share price doubled in a month and I asked him to take profit, he turned around and asked me to give him a good reason to sell. Now it seems that he was right."

By January this year the old man was holding more than 2 million shares. At more than 100 yuan apiece, he was worth more than 200 million yuan — an astronomical sum considering the per capita income of China is less than 14,000 yuan.

Today, even though the prices of Chinese shares in general have fallen, the old man is still an extremely wealthy man, and he is still holding on to his Guizhou Maotai shares, in the firm belief that the current upset is merely a hiccup and the share price will continue to rise in the long run.

He may be soon proven wrong, however. Maotai is addictive, and its production uses a lot of water. The people of Guizhou — nearly 40% are of minority races — have one of the highest mortality rates in China because of liquor consumption. And each tonne of Maotai requires five tonnes of sorghum, the farming of which requires a lot of water. Guizhou itself has a long history of famine. With a growing population, pollution and industralisation, it is getting more and more expensive to process sorghum into Maotai. Sooner or later, the cost of producing the liquor will have to rise, cutting into margins and eroding the share price of Guizhou Maotai.

 

 

lee han shihLee Han Shih is the founder, publisher and editor of asia! Magazine.

 

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