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Is Chinese food and beverage a bubble waiting to burst?

Bloomberg9/7/2020 11:42 AM GMT+08  • 3 min read
Is Chinese food and beverage a bubble waiting to burst?
It is not unheard of to see F&B stocks valued at 50-100 times earnings, a phenomenon allegedly engineered by professional stock pickers.
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In China, an even scarier bubble than Big Tech is brewing. It's engineered not by the nation’s notorious mom-and-pop investors, but professional stock pickers.

These days, even a soy sauce maker can be valued at 100 times earnings. And this is no penny stock: Foshan Haitian Flavouring & Food Co. is a blue chip with an $81 billion market cap. From pig farmers to manufacturers of China’s famous fiery liquor, the food and beverage industry has surpassed banks as the heavyweight in the benchmark CSI 300 Index. On average, the sector has rallied 60% this year.

This trade started to unwind last week. On Thursday, without warning, Foshan Haitian tumbled off its record high. The selloff widened to the entire sector Friday. Foshan dropped 14% in two days.

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