Sportswear firms set pace in Hong Kong market

Investors take a punt on the sector being the first to recover from the economic downturn

PUBLISHED : Saturday, 29 September, 2012, 12:00am
UPDATED : Saturday, 29 September, 2012, 2:32am

Sportswear retailers made a strong rebound on the stock market yesterday with investors betting they were likely to be among the first consumer-related sectors to recover from the economic downturn.

Shares of mainland-focused sportswear companies jumped up to 10.7 per cent ahead of the week-long National Day holiday starting tomorrow. Department stores, apparel and jewellery firms also rose.

Anta Sport Products, the largest local sportswear retailer in terms of total sales, rose 9.6 per cent to close at HK$5.96, while Li Ning climbed 6.7 per cent to HK$4.13.

Top gainers also included Fujian-based Peak Sport Products, Xtep International Holdings and 361 Degrees International, which jumped between 9 and 10.7 per cent.

The benchmark Hang Seng Index closed 0.38 per cent higher.

"We expect sportswear to be one of the first of the consumer discretionary segments to emerge from the current downturn as the consolidation process is near completion," Spencer Leung, an analyst at UBS, said.

Recent times have been painful for mainland sports retailers, which suffered from market oversupply following the Beijing Olympic Games and weak consumer demand due to the economic downturn.

Their profits in the first half dived because of slowing sales and increasing costs, triggering a further decline in share prices.

Li Ning, for example, recorded an 85 per cent slump in profits for the six months to June. The share price of the Beijing-based seller of sports shoes and apparel has lost 45 per cent over the past year.

Most players in the market have slowed their expansion over the past year and started to make efforts to enhance their operational capacity, including revamps of their design processes and ordering systems.

"We have turned bullish on the sportswear segment," Leung said. "We anticipate Anta, Xtep, and to some extent Li Ning, are more likely to emerge as domestic winners."

Shares of leading jewellery retailer Chow Tai Fook Jewellery Group, Luk Fook (Holdings) International and Tse Sui Luen Jewellery (International) also rose more than 2 per cent.

New World Department Store China gained 2.9 per cent and Sogo store operator Lifestyle International rose 1.9 per cent.

Analysts believe retailers will benefit more from the National Day holiday, from tomorrow to October 7, which is one day longer than usual.