E-Malt.com News article: China: Tsingtao shares fall in price as Merrill Lynch cuts its stock rating

Tsingtao Brewery Co., China’s largest beer company by sales, headed for the biggest drop in three weeks in Hong Kong trading after Bank of America Corp.’s Merrill Lynch & Co. cut its stock rating on concern revenue growth will slow, Bloomberg reported on February, 3.

The Chinese brewer declined 3.5 percent to HK$14.38 at the midday trading break in Hong Kong, set for the steepest slide since Jan. 8. Its Shanghai-traded shares slid 1.8 percent.

“Weaker consumer sentiment is taking a toll on beer consumption,” Merrill Lynch analysts Denise Chai and Tina Long said in a note to clients on February, 3. “Tsingtao appears to have missed our 2008 volume growth forecast.” They lowered their recommendation on the brewery to “underperform” from “buy.”

Slowing income growth is cooling demand for beer in China, whose economy grew 9 percent in 2008 after a 13 percent expansion in 2007. Per-capita disposable income in Chinese urban areas rose 8.4 percent in 2008, slowing from a 12.2 percent rate a year earlier, according to the National Bureau of Statistics.

The brewery also bought a “large amount” of barley, an ingredient used in beer making, at a “relatively high price” when prices of the grain surged in the first half of 2008, the Merrill Lynch analysts said. They cut their share-price estimate by 25 percent to HK$13.28.

The Hang Seng Index gained 0.6 percent while the mainland Shanghai Composite Index advanced 1.4 percent.


04 February, 2009