SHANGHAI/BEIJING, Feb 18 (Reuters) - Shares of a Chinese power supplier surged this week after its board proposed inserting “Moutai” into its company name, in an apparent attempt to link it with the world’s most valuable liquor brand.
The practice - and the market reaction - highlight how such opportunism can be effective in a market heavily influenced by retail investors.
Xinyang Maojian Group Ltd’s shares jumped as much as 48% this week in Hong Kong after the company, which also sells wine, proposed changing its name to China Dragon Moutai Group Ltd to project “a more appropriate image and identity”.
The new name evokes similarities to Kweichow Moutai Co , the world’s top liquor brand by market cap, making Maojian the latest example of a Chinese company boosting its share price without having to change business fundamentals.
The renaming, which still requires shareholders’ approval, highlights a long-running practice in China where some companies change names to capitalize on market fads.
In 2015, when fintech and peer-to-peer lending was hot in China, a Chinese commodities trading firm saw its share price surge after it renamed itself P2P Financial Information Service Co.
That same year, fireworks maker Panda Fireworks announced it would change its name to Panda Financial Holding Corp , triggering queries from the Shanghai stock exchange.
Maojian’s renaming proposal appears well-timed.
Moutai’s shares have jumped over 20% so far this year to record levels after 2020’s 69% surge, fuelled by analyst re-ratings and ample market liquidity.
Signs of a supply shortage during the week-long Lunar New Year national holiday further boosted sentiment.
Terrance Liu, analyst at brokerage CLSA, on Thursday upgraded Moutai to outperform, and raised its price target to 2,935 yuan - roughly 19% higher than the current level - citing “an increasing likelihood of price hikes and its more defensive positioning.”
But Maojian’s apparent attempt to strengthen from Moutai’s branding power is controversial.
“Moutai is a well-known brand, so such renaming risks infringing (Kweichow) Moutai’s trademark rights,” said Liu Bin, lawyer at Zhongwen Law Firm.
But Dong Wei, founder of Beijing-based P.C. & Associates, a law firm focusing on intellectual property, said it would not be easy to challenge Maojian. “The name that is authorised is Kweichow Maotai liquor, not Moutai,” he said, adding the word Moutai itself was not trademarked. In addition, Maojian’s main purpose was to attract investors’ attention, instead of competing against Moutai directly, he added. Maojian had no immediate comment and Kweichow Moutai could not be reached for comment.
$1 = 6.4642 Chinese yuan renminbi Reporting by Sophie Yu, Samuel Shen, and Brenda Goh; Editing by Kim Coghill