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The Booze Is Flowing in China

Kweichou Maotai, the biggest company of its kind in China, announced a 20% to 30% ex-factory price hike from this month, after share prices hit a record high in July. China Jiugui Liquor saw a historic high around the same time.

Valuations for China's overall spirit sector are strong, according to an analysis by the Swiss investment bank UBS. It says the sector is trading at 12 times 2013's estimated price-to-earnings ratio, implying 36% growth potential for next year. Over the past month shares have sagged, but that's seen as a short-term trend that just makes them cheaper for now.

Shares of both Kweichow and China Jiugui already show signs of picking up -- quickly.

"Historically, spirits have been less affected by economic slowdowns compared to other consumer sectors, especially since 2010," UBS said in a note to this column last week. "We believe sectors with stable results growth profiles may still enjoy a valuation premium upside."

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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