As Chinese tech stocks lose momentum, the country’s sportswear companies are forging ahead, giving investors an alternative game for Chinese consumers.
Shares of Li Ning, named after the gymnast who founded the company, have gained 983% since the end of 2018. Shares of Anta, owner of the Fila brand in China, have more than quadrupled over the same period.
The area is experiencing short-term tailwinds. As part of a five-year mass fitness program announced this month, the government announced it would build more fitness facilities and encourage people to exercise. Beijing aims to bring the sports industry to 5,000 billion yuan, the equivalent of $ 772 billion, by 2025, which would represent a 70% increase from 2019 levels. And at a time when concerns regulatory cloud the outlook for many other sectors, especially the Internet industry, sportswear stocks appear to be a safe haven.
The backlash against foreign brands over their stance on the use of forced labor in China’s Xinjiang region earlier this year also gave their Chinese competitors a boost. Nike and Adidas are the top two sportswear brands in China, accounting for 43% of the market in 2020, according to Euromonitor International.
But the rise of Chinese brands also predates recent tensions. Anta’s market share, for example, increased from 11% in 2017 to 15% in 2020, according to Euromonitor. Li Ning’s operating profit has been increasing every year since 2015, when he came out of three years of losses. The company’s operating profit in the first six months of this year has almost quadrupled from two years ago, according to results announced last week.