KWEICHOW Moutai Co. has been the toast of China’s blue chip stock rally, surging 93 percent this year.

The stock’s eye-popping rise prompted an editorial last month by Xinhua that singled out Shanghai-listed Moutai as an example of a major stock vulnerable to value-destructive speculation.

While even the drinkmaker agreed its rally was too hot, the pointed warnings had limited market impact, knocking barely 10 percent off the stock’s gains for the year, with the rally resuming as investors scooped up what they saw as a bargain.

And despite words of caution about a stock bubble from official channels and some market participants, other institutional investors argue a wider blue chip rally could last well into next year as China’s investor base widens.

“Moutai’s current valuation is not a deviation from fundamentals,” said Jacqueline Zhang, Emerging Markets Equity analyst at U.S.-based investment manager OppenheimerFunds, whose China fund remains one of Kweichow Moutai’s top 10 shareholders.

“No doubt, Moutai is the most profitable liquor company in the world. The uniqueness of its assets merits the premium.”

Although OppenheimerFunds slashed nearly one-fifth of its holdings in the firm last quarter as its stock price hit levels double that at the beginning of the year, it maintains that Moutai is not overpriced.

More broadly, the blue-chip index is up about 22 percent this year, though it’s been a bumpy ride higher.

The SSE50 index, which investors have dubbed China’s Nifty 50 index, has far outperformed the broader stock market this year, but posted its worst weekly loss in almost 12 months in the last week of November. Index heavyweights, including Moutai, insurance giant Ping An and automaker SAIC Motor, saw heavy selling.

Several large investment firms concur that while prices of some large firms are in bubble-like territory, fresh investment flows from foreign funds looking to partake in China’s rapid growth will push share prices even higher.

Shi Bin, the head of China equities at UBS Asset Management in Hong Kong, said this year’s sharp rise in blue chips reflects a normalization of previously depressed valuations.

He expects China’s inclusion next year into global index provider MSCI’s benchmarks will channel more money into China’s large-cap stocks, pushing prices higher. (SD-Agencies)