Moutai shares frozen on claim of tainted products

Kweichow Moutai Co, a Shanghai-listed high-end liquor maker in China, suspended the trading of its stocks on Monday, after an anonymous online post claimed a laboratory report, supposedly conducted by a Hong Kong testing agency, showed the company's liquor contains an excessive amount of a harmful chemical.

The message posted on Xueqiu.com, a social interactive platform for investors in China, said the Hong Kong report showed that 3.3 milligrams per liter of DEHP, or 1.4 times the limit allowed by the Ministry of Health, was found in a 200 ml bottle of 53-proof Moutai Feitian, one of the company's most popular products. DEHP may cause damage to the liver, kidneys, lungs and reproductive system when consumed in excess.

The person who posted the message identified himself by the nickname "Shui Jing Huang" and claimed he is a 35-year-old Hong Kong resident originally from Guangdong province.

The name of the testing organization is blanked-out in the report as the anonymous poster said he does not want to get into trouble.

Moutai responded that the company doubts the credibility of the test, as the presentation of the report is suspect and looked as if it had been written on Microsoft Word. The test also did not record the batch identification of the product and failed to meet the standard requirements of quality-testing reports, sina.com reported.

On Monday, Wang Li, chief engineer with Moutai, said the company has strengthened evaluations, controls and checks of plastic-made materials since May, when several scandals concerning the illegal use of plasticizers were discovered in beverages and food in Taiwan. "The company has set up a plastics monitoring system, which strictly checks the quality of all products," said Wang.

She said the company has sent products to three organizations in Guizhou, Beijing and Shanghai for testing, and all of the results have shown the products meet national standards.

The market value of Moutai has slumped some 20 billion yuan ($3.2 billion) after consecutive slumps in the share price in December.

Liquor company shares saw a weak opening on Monday, but rebounded in the afternoon. The liquor sector closed with a 2.19 percent increase.

Distiller and liquor shares have been suffering after excessive levels of plasticizer were found in Jiugui Liquor products last month.

As the New Year and Spring Festival are approaching, the consumption of liquor may be boosted in the next two months, and the entire liquor market may have already bottomed out. The biggest risk for the industry may be an outbreak of food and beverage safety scandals - if there are any problems yet to be discovered, according to a research paper from Bohai Securities Co Ltd.