The US investment bank, Merrill Lynch, has reduced its rating on the Hong Kong-listed Chinese brewer, Tsingtao, from "buy" to "sell" as a result of the impact of the SARS virus in the region and after Tsingtao's stock had risen by 58% from June to above Merrill's price target for the stock of HK$4.80 a share.

"SARS heightens earnings risk, and we believe consumer stocks with high P/E valuation like Tsingtao are susceptible to a sell-off by the market in the coming months," Merrill Lynch said.

The bank has also reduced its 2003 earnings forecast for Tsingtao by 24% to CNY246m (US$29.7m) against a net profit of CNY223m which Tsingtao reported in 2002.