Textile shares soar on solid growth view

PUBLISHED : Saturday, 17 May, 2003, 12:00am
UPDATED : Saturday, 17 May, 2003, 12:00am

Stock prices of Hong Kong textile exporters rose yesterday as focus on strong earnings growth coupled with prospects of increased international market share ahead of the planned scrapping of export quota restrictions boosted their investor appeal.

Investors have dived out of property and travel-related stocks and latched on to the still-robust export sector where firms have maintained strong order books despite weak overseas demand.

Shares in leading cotton fabric maker Fountain Set (Holdings) surged 11.01 per cent to a record high of HK$6.55 yesterday after it reported a 90 per cent rise in interim profit a day earlier. Rival textile firm Texwinca Holdings rose 7.69 per cent to close at $6.30 while Victory City International Holdings leapt 9.29 per cent to $2.175 and Tungtex (Holdings) climbed 4.7 per cent to $2.225.

The increasing trend of United States companies outsourcing production in China and the gradual phasing out of US garment quotas by 2005 are promising Hong Kong-based textile firms far larger market opportunities.

It follows dramatic downsizing in the US textile sector due to price competition and environmental concerns, with about 100 textile mills closing in the past two years, according to BOC International analyst Selina Sia.

This trend has forced US-branded garment firms to lift outsourcing to low-cost and efficient producers which run factories across Southeast Asia but are increasingly scaling up production capacity in the Pearl River Delta.

That growth is expected to continue despite weak overseas demand as US quotas on garment exports are eliminated. However, the US is expected to invoke anti-surge provisions should the flow of cheap products escalate to unmanageable levels.

'To fund managers, export-orientated industrial stocks are better investments than blue chips,' said Tung Tai Securities associate director Kenny Tang Sing-hing.