The 2025 fourth-quarter reports for public offering funds have concluded their disclosure period, and the only fund tracking the baijiu index, the China Merchants Zhongzheng Baijiu Index Fund (hereinafter referred to as the Baijiu Fund), has delivered a report card of "losses but outperformance." The fund's net asset value per unit for both its Class A and Class C shares fell by approximately 9.5% in the fourth quarter of last year, yet it outperformed its benchmark during the same period. In terms of major holdings, Kweichow Moutai Co.,Ltd. has returned to being the fund's largest holding. Furthermore, regarding subscriptions and redemptions, investor sentiment towards the Baijiu Fund showed a distinct divergence: Class A shares were redeemed, while Class C shares received increased investments. Behind this contrasting fourth-quarter report lies the question: is it the realistic pressure of the baijiu industry's consumption recovery falling short of expectations, or do leading companies still possess long-term investment value that remains favored? The Baijiu Fund's 2025 fourth-quarter report shows that during the reporting period, the net value growth rate for the fund's Class A shares was -9.50%, and for Class C shares it was -9.53%. The benchmark return for the same period was -9.78%, meaning the fund outperformed the benchmark by 0.28 percentage points and 0.25 percentage points respectively, with tracking error kept within the limits stipulated by the fund contract. Looking at a longer timeframe, the net value growth rates for the fund's Class A and Class C shares over the past year were -12.63% and -12.72% respectively, outperforming the benchmark by 2.68 percentage points and 2.59 percentage points sequentially. Fund manager Hou Hao stated that in the fourth quarter of 2025, the CSI Baijiu Index fell by 10.29%, making it one of the poorer-performing sectors. The fund's position was maintained at around 94.5%, essentially completing its tracking of the benchmark. Industry insiders also pointed out that in the fourth quarter of 2025, the baijiu sector was affected by factors such as a slower-than-expected pace of consumption recovery and pressure on terminal sales, leading to an overall adjustment trend, with most individual stocks in the sector experiencing declines. As a product that passively tracks the CSI Baijiu Index, the net value performance of China Merchants Zhongzheng Baijiu A is highly correlated with the sector's trend. It was noted that China Merchants Zhongzheng Baijiu A increased its holdings in Kweichow Moutai Co.,Ltd., Wuliangye, Yanghe Brewery, and Gujing Distillery during the fourth quarter of last year, while reducing its holdings in Shanxi Fenjiu and Luzhou Laojiao. Jiugui Liquor exited the fund's list of top ten holdings. As of December 31, 2025, the combined proportion of the top ten holdings of China Merchants Zhongzheng Baijiu A reached 84.79% of the fund's net asset value, showing a significant characteristic of concentration in leading companies. Among them, Kweichow Moutai Co.,Ltd. reclaimed the position of the largest holding with a weighting of 15.38%, and the fair value of its holding reached 6.642 billion yuan. As the fund manager of the Baijiu Fund, Hou Hao also shared his thoughts on the baijiu market in the 2025 fourth-quarter report. Hou Hao stated that from an industry perspective, due to the disclosure of third-quarter reports for the baijiu sector in the last quarter, the entire baijiu industry experienced accelerated clearing on the financial statement side in the fourth quarter. At the channel level, pressure was evident due to environmental changes, and the wholesale prices of various products declined. Distillers are finding it increasingly difficult to find the optimal balance between price and volume, channel profits, and revenue stability. The squeeze by leading companies on mid-tier companies is expected to become more pronounced in the near future. The bottom of the baijiu market's valuation depends on core consumer groups, wholesale price expectations, and market share changes. Leading companies are seeking market-oriented paths to solve the challenges of the current complex environment. Compared to 2014, their scale and structure have increased the difficulty of operations; whether they can find more possibilities through transformation remains to be seen. On the other hand, baijiu's investment attribute as a post-economic cycle asset may still hold true in this cycle. Over a longer time dimension regarding changes in wholesale prices and market share, the fund maintains stable expectations for leading baijiu companies. Indeed, judging by the attitudes of fund investors, their actions corroborate Hou Hao's views. It was discovered that in the fourth quarter of 2025, the Class A and Class C shares of the Baijiu Fund showed a clear divergent trend. Specifically, Class A shares experienced net redemptions, decreasing from 41.196 billion shares at the beginning of the period to 40.142 billion shares at the end of the period, a net reduction of 1.054 billion shares. In contrast, Class C shares saw growth, increasing from 19.225 billion shares at the beginning of the period to 20.796 billion shares at the end of the period, a net increase of 1.571 billion shares. The aforementioned industry insider analyzed that Class C shares, because their sales service fees are accrued daily, are more suitable for short-term holding. Their growth might be related to some investors speculating on a short-term rebound in the baijiu sector and preferring low-cost transactions. Class A shares are more suitable for long-term holding, and the redemptions this time may reflect the cautious attitude of long-term capital towards the pace of recovery in the baijiu industry.
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