Beneath the Surface of China’s CSI 300 Index is Kind of Boozy

July 16, 2019
By Steven Vannelli, CFA in Markets

On January 3, 2019, Chinese stocks made a v-shaped bottom and surged into a peak on April 19, 2019. Since then, stocks have corrected by about 7%, dropping, recouping about 6% of the peak to trough decline that ended on June 6, 2019.

Interesting, when I look through sector performance, it looks like the index is being held up by one sector—consumer staples. All other sectors have corrected significantly since the April peak, while consumer staples have held steady.

Looking through to one more level, it isn’t even the whole sector that is keeping performance afloat. The beverage industry is the only industry in the CSI 300 Index where all members have positive returns over the last three months. Four of the six members notched gains of more than 10% (green) while 2 notched gains of between 0-10%.

Literally, it is only booze producers that are holding up the CSI 300. Unlike the US, where lots of beverage companies are non-alcoholic (Coke, Pepsi, Monster), in China all listed companies make beer, wine and/or spirits.

As of 6/30/19, Coca-Cola and Monster Beverage Corp were held in the Knowledge Leaders Strategy and Pepsi and the CSI 300 Index beverage companies listed in the table above were not held.

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