Across The Border

Rio’s A-share winners and losers

Women’s volleyball gold sparked a spike in Bright Dairy & Food’s share price, but Ning Zetao’s flop in the pool, meant the opposite for Yili Industrial

PUBLISHED : Friday, 26 August, 2016, 2:36pm
UPDATED : Friday, 26 August, 2016, 9:38pm

The fighting spirit of China’s women’s volleyball team – gold medalists at the Rio Olympics, in the most dramatic style – looks to have been mirrored in the country’s stock market, as equity punters took their cue from the epic comeback victory to bet on stocks with any link to the country’s top sports stars.

On the day after China beat Serbia 3-1 in the final to clinch team gold, shares in Shanghai-based Bright Dairy & Food, the sponsor of the national side, jumped 4.4 per cent to 15.56 yuan as investors hoped the powerful win, would spur strong sales of Bright’s products across the mainland.

Industrial Securities predicted in a research report shortly after the victory, that it could help Bright increase its sales in the remaining year, as the image of the team in the company’s namesake brand’s advertisements and TV commercials is likely to inspire consumers to buy more of the Shanghai-listed company’s milk.

The team, coached by Lang Ping, a legendary volleyball player who helped China win the first of five world titles between 1981 and 1986, has been propelled to star status in the world’s most populated country since their dramatic win.

On the same day, Zhejiang Shapuaisi Pharmaceutical, which hired coach Lang as an ambassador for its products, surged 2.5 per cent. And shares in Wuxi Double Elephant Micro Fibre Material, that supplies leather for making the balls themselves, jumped to the 10 per cent daily trading limit, as investors bet on a buying euphoria on volleyballs.

But in stark contrast, Bright’s arch-rival Inner Mongolia Yili Industrial Group saw its A-shares drop 1.1 per cent on August 10 when Ning Zetao, a world champion swimmer, failed to qualify for the final of the men’s 100-meters freestyle. The iconic Chinese athlete is a spokesman for Yili products.

“Like those sports stars, it’s also about winners or losers when it comes to sponsorship during the Olympics,” said He Yan, a hedge fund manager with Shanghai Shiva Investment.

“The listed firms’ performance is linked to the results their sponsored stars achieve, but their stock price more often depends on the herd mentality of retail investors.”

China’s millions of mainland retail investors do tend to invest with a theme firmly in mind, believing their influence could spark heavy buying, which in turn will deliver short-term gains, especially in the kind of fluctuating market we have experienced of late.

And the Rio Olympics became the latest trend for equity punters, say experts, as they closely monitored contests before making investment decisions.

There are roughly 40 A-share companies linked with the sportswear, sport equipment, security and surveillance equipment, and consumer products sectors, that could fall under the collective category of Olympic-themed stocks, whose market movement could be impacted by the world’s biggest sport event.

Dahua Technology, for instance, a Zhejiang-based video surveillance products and services provider, meanwhile, soared nearly 20 per cent between the beginning of June and when the games ended, buoyed by the fact it was a main supplier of security and surveillance equipment to the event.

“To play the stock market here, you need the fighting spirit the athletes displayed at the Olympics,” said Joe Zhou, a seasoned retail investor who bought another 200,000 yuan worth of shares, with an Olympic link, during the 17-day Olympics.

Despite making only a small profit from his Olympics fever, he added: “Buying Olympics-themed stocks was an exciting moment I couldn’t afford to miss out.”

Mainland retail investors have generally been baulking at diving into their slumbering stock market for more than a year, after a selling rout wiped out US$5 trillion of capitalisation between mid-June and late August in 2015.

Arguably more than any other major market worldwide, Chinese retail investors are prone to making snap decisions if they smell any hint of a short-term gain.

The grim reality for many, however, is that this type of spur-of-the-moment investment more often that not ends up in a loss, especially in a market so used to recent turbulence.

The Rio Olympics became a showcase for Chinese sportswear brands. The [country’s] sportswear industry currently has a clear profit model
China International Capita report this week

During the 2008 Beijing Olympics, seen by many as the country’s greatest opportunity to display China’s economic might and political influence, the benchmark Shanghai Composite Index tumbled 11.8 per cent, which experts said was influenced by this kind of reckless pursuit of quick-fire profit.

Some investment experts still believe the Rio Olympics could end up boosting the Chinese businesses related to sport, despite the overall lower-than-expected performances of its athletes.

China won 26 golds in Rio de Janeiro, compared to 38 they clinched in 2012 London Olympics.

According to a report published by China International Capital Corp, Chinese sportswear companies could well become the biggest national winners at the games.

Names including 361 Degrees, Peak Sport and Anta were ubiquitous on the kits of many competitors and officials, not just Chinese, as main sponsors.

“The Rio Olympics became a showcase for Chinese sportswear brands,” China International Capita said a report this week.

“The [country’s] sportswear industry currently has a clear profit model.”

The market might have to wait a few months to measure any resultant spike in sales by those and other domestic sportswear makers.

But certainly the Rio game looks like proving a high-profile national success in terms of global visibility, as well as underlining the government’s drive to promote healthier, sportier lifestyles.