Trade war takes toll
The stock price of China Tobacco International (CTI) declined 17 percent after the company announced a 30 percent drop in net profit during the first half of 2019.
CTI, which procures leaf tobacco for its parent company, the China National Tobacco Corp. (CNTC), was listed on the Hong Kong stock exchange in June.
Investors were initially excited to get their hands on part of the state monopoly. Shares of the company have more than quadrupled the initial offer price.
However, CTI has recently been hit hard by China’s trade war with the United States where the company purchased 30 percent of its leaf requirements in 2018.
Analysts have also cautioned that CTI is a poor proxy for the lucrative Chinese cigarette industry.
Although CNTC sells three times as many cigarettes as the world’s largest publicly listed tobacco firm, Philip Morris International, the primary beneficiary of its business is the Chinese government.