In the minds of many ordinary investors, the baijiu index was once seen as a clear and worry-free investment track. There was no need to pick individual stocks or assess corporate governance—as long as China’s consumption upgrade continued, leading baijiu companies would trend upward. China Merchants CSI Baijiu Index LOF was one of the typical representatives of this logic. However, when viewed over the past few years, that familiar sense of security has been repeatedly eroded. With its net asset value stagnating and showing limited rebound strength, holders are increasingly asking one question: Is baijiu still a viable sector? Looking back at the fund’s phased performance today, it hasn’t suddenly become ineffective—instead, it has been dragged into a cycle where the industry and valuations are both undergoing a prolonged digestion phase. The decline has been prolonged. From a阶段性 perspective, the performance of the A-share class of China Merchants CSI Baijiu Index Fund gives an immediate impression of weakness. As of December 26, 2025, the fund fell 5.91% over the past three months. It declined 11.27% over one year, 20.14% over two years, and 36.15% over three years. The characteristics of this data are clear: the downturn has been long, and rebounds have been weak. Even with a slight positive return of 0.72% over the past six months, it has done little to restore investor confidence. At the same time, it’s important to note that this is not a product experiencing extreme drawdowns or structural instability, but rather a typical index performance during an industry consolidation phase. What’s going on? China Merchants CSI Baijiu Index was established in May 2015 and has been in existence for over ten years, making it one of the earlier baijiu index funds. As of September 30, 2025, the fund’s size was RMB 32.314 billion, positioning it as a standard large-cap index fund. This scale itself indicates that it has historically met the allocation needs of many institutional and individual investors. In terms of product type, it is an index equity fund that tracks the CSI Baijiu Index, and its replication of the index is stable and compliant. The key feature of such products is that they make no active judgments or style shifts, fully absorbing the cyclical fluctuations of the sector itself. During baijiu’s peak popularity, this design offered certainty and efficiency. But when the sector enters a digestion phase, it reflects the industry’s downturn without any cushioning. The net asset value is largely determined by a few major baijiu leaders. Looking at the holding structure, the fund’s net asset value is almost entirely driven by the top baijiu companies. As of September 30, 2025, the top ten holdings accounted for 84.75% of the portfolio. Among them, Luzhou Laojiao represented 15.97%, Shanxi Xinghuacun Fen Wine Factory 15.84%, Kweichow Moutai 14.17%, Wuliangye Yibin 13.80%, and Yanghe Brewery 8.1%. The top five holdings together made up approximately 67.88%. This leads to a straightforward conclusion: the performance of China Merchants CSI Baijiu Index is essentially a weighted combination of a few core baijiu companies. When companies like Moutai, Wuliangye, and Luzhou Laojiao fail to exhibit trending momentum, it is nearly impossible for the index to strengthen independently. Any notion of diversification here is largely superficial. This is why investors often feel that while they’re buying a fund, they’re still closely watching the same few “old friends” every day. How should investors approach such a product? Why haven’t baijiu stocks seen a strong market follow-through? This is where investors feel most puzzled. From a fundamental perspective, leading baijiu companies haven’t experienced systemic collapse. Profits remain, cash flows are stable, and dividend capabilities are intact. The issue, however, is that the market is no longer willing to pay a high premium for high certainty. On one hand, the industry as a whole has entered a phase of stable or even contracting demand, with high-growth expectations fading. On the other hand, the valuation framework is shifting from scarcity premiums to cash flow-based pricing. Against this backdrop, index funds naturally exhibit a slow digestion pattern. For baijiu index products, the most important adjustment investors need to make is to their expectations. This is no longer a tool for capturing short-term gains but rather an equity component within a stable asset allocation. It is better suited not for short-term capital but for long-duration,配置-oriented funds that can tolerate volatility in exchange for dividends and sector stability. Within a portfolio, it functions more as an anchor in the consumer sector rather than an offensive先锋. It pairs well with broad-based indexes, dividend-focused assets, and fixed-income products. If investors view it as an industry allocation that requires time to mature, their anxiety will significantly diminish. The baijiu index hasn’t disappeared—it may simply have returned to a more realistic and appropriate position. Where does the value variable lie? The current state of China Merchants CSI Baijiu Index is not unique. It represents a type of sector that was once highly consensus-driven. This process tends to be long and tedious, but it is a necessary stage for the market to transition from emotion to rationality. For baijiu, time is no longer the enemy but the only variable that can ultimately prove value. The decision to continue holding depends not on whether one is optimistic about baijiu, but on whether one is willing to accept its existence at a slower pace.
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