The three major indices of the A-share market fell collectively today. By the close, the Shanghai Composite Index dropped by 2.48% to 4015 points, the Shenzhen Component Index declined by 2.69%, the ChiNext Index fell by 2.46%, and the STAR 50 Index dropped by 3.88%. The total trading volume of the entire market reached 2.61 trillion yuan, a decrease of 255.8 billion yuan compared to the previous trading day, with over 4600 stocks falling and more than 100 stocks hitting the lower limit.
The food and beverage sector rose against the trend, with products such as the Liquor ETF, Huabao Food and Beverage ETF, Yinhua Food and Beverage ETF, Food and Beverage ETF, Food and Beverage ETF Fund, Consumption ETF Huaxia, and Tianhong Food and Beverage ETF posting gains despite the broader market decline.
From the perspective of fund holdings, public funds reduced their allocation to the food and beverage sector in the fourth quarter. At the end of the fourth quarter of 2025, the proportion of food and beverage sector holdings in funds was 6%, down 0.3 percentage points from the previous quarter. Across all industries, the food and beverage sector ranked seventh in terms of heavy allocation, dropping one place. The sector remained in an over-allocated state, with an over-allocation of 2.5 percentage points, which was largely unchanged from the previous quarter. Both active and passive funds reduced their allocations, with passive funds experiencing a larger reduction. The holding ratio of active equity funds decreased by 0.2 percentage points to 3.9%, while that of passive index funds fell by 0.6 percentage points to 8.4%.
The allocation to the liquor sector decreased, while mass-market products saw increased allocation. In the fourth quarter of 2025, the holding ratio for liquor fell by 0.4 percentage points to 5.1%, further reducing its over-allocation. Meanwhile, the holding ratio for mass-market products stood at 0.9%, up by 0.1 percentage points, remaining under-allocated but with a narrowing gap. Among these, sectors such as beverages, dairy products, food processing, snacks, and condiments all experienced increased allocation, while beer saw a reduction.
Leading liquor companies faced reduced allocations, while standout increases were seen in mass-market individual stocks. By the end of the fourth quarter of 2025, among the top 20 stocks held by funds based on market value, only Kweichow Maotai from the food and beverage sector made the list. The liquor sector generally saw reductions in allocation, including key players like Wuliangye Yibin, Luzhou Laojiao, and Shanxi Xinghuacun Fen Wine, although Kouzi Winery saw a significant increase in allocation. In the mass-market sector, key stocks received notable increases in holdings. For example, leading livestock companies You Ran Livestock and Modern Pastoral saw their holdings rise by 256.7% and 80.5%, respectively. In the snack sector, Ximai Foods' holdings surged by 170.4%. Additionally, leading dairy companies Inner Mongolia Yili Industrial Group and Mengniu Dairy's holdings grew by 25.9% and 48.2%, respectively.
Caitong Securities noted that short-term data from the annual goods festival phase, combined with medium-to-long-term industry trends, could support continued improvement in the sector. In terms of leisure snacks, certain targets have shown marginal changes in costs, channels, and products. At this point, focusing on the annual goods festival, the overall elasticity expectation for Q1 is positive due to timing shifts and base effects. On a full-year basis, attention can be directed toward the liquor and health sectors. Furthermore, under the backdrop of low valuations, dividend yields of some high-dividend leading targets have risen, highlighting their income attributes.
Open Source Securities pointed out that after continuous adjustments earlier, the food and beverage sector is now at a low point both fundamentally and in terms of valuation, presenting significant investment value. In December 2025, the CPI increased by 0.8% year-over-year, showing a mild recovery trend. Combined with the already clear policy tone of expanding domestic demand and promoting consumption, signals of a bottoming-out in industry demand are gradually emerging. Current sector valuations and policy bottoms are resonating, with pessimistic expectations gradually being released, providing a safety margin for investments. The liquor sector’s valuation is currently at a multi-year low, with low market expectations and favorable positioning in the investor base, indicating it is nearing the bottom and has investment potential. Two main strategies are recommended: first, focus on targets that have been sufficiently adjusted and possess high elasticity; second, allocate to industry leaders with stable performance and strong risk resistance. The Spring Festival peak season preparation will serve as a core catalyst for sector earnings, highlighting the resilience of mass-market product demand. The snack track continues to show rising momentum, compounded by the Spring Festival timing mismatch effect, suggesting that sector earnings in Q1 2026 could achieve relatively rapid growth. Key areas of focus include raw milk/dairy products, the snack sector, and the catering supply chain within mass-market products.
Orient Securities stated that expectations of price increases have started, and identifying targets with pricing power is critical. Commodities such as non-ferrous metals and agricultural products are either in price-increase intervals or at turning points at the bottom, but terminal consumer spending remains constrained by the debt cycle, showing slow recovery. The environment of 'upstream price increases and downstream weak recovery' poses challenges for both C-end consumer goods and B-end suppliers in the food and beverage industry. We believe that in the next stage, targets with price transmission capabilities or pricing power will demonstrate earnings elasticity, while those lacking such abilities may see squeezed profits. Priority should be given to upstream B-end food and beverage targets. In the current environment, the closer the supply chain is to consumers, the weaker its price transmission ability becomes. Therefore, upstream food and beverage raw material suppliers targeting the B-end possess stronger price transmission capabilities. Stock selection should primarily revolve around two themes: 1) categories with certain scarcity or relatively limited supply; 2) industries with clear competitive landscapes where leading companies have pricing power. For C-end food and beverage targets, pricing power is more reliant on brand strength and functional labels. Similarly, considering the current consumption environment, we believe that transmitting price increases to C-end food and beverage targets is relatively difficult and more dependent on brand strength and functional labels.
