Anta, Li Ning shares surge as Chinese consumers back domestic brands in Xinjiang cotton row
- Chinese consumers boycott goods made by H&M, Adidas and Nike, as they face a backlash on the mainland for not buying cotton produced in Xinjiang
- Chinese firms like Li Ning, Anta, Bosideng, Peacebird and Semir are likely to take market share from foreign rival amid the backlash, Zheshang Securities says
Shares of Chinese sportswear and apparel companies rose on Friday, as a resurgence of nationalistic sentiment hit sales of leading foreign brands after the West imposed sanctions on China.
“Amid the backlash on foreign brands, we believe Chinese sportswear brand Anta and Li Ning to further challenge the China market shares of Nike and Adidas, while leading Chinese leisure wear brands Bosideng, Peacebird and Semir to encroach on shares of Uniqlo and brands marketed by Bestseller Fashion Group [such as Jack & Jones],” Zheshang Securities analyst Ma Li said in a note on Friday.
03:36
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Nike lost 3.4 per cent in the US and Adidas sank 6.1 per cent in Europe on Thursday, while Uniqlo’s owner Fast Retailing shed 0.4 per cent to HK$60.80 in Hong Kong on Friday.
H&M said in a statement last year that it was “deeply concerned” by media and civil society reports mentioning accusations of forced labour and discrimination of the minority Uygur people, and that it “strictly prohibits” any forced labour in its supply chain regardless of location.
The statement, which said it did not source cotton from Xinjiang and would take immediate action to terminate business relationships with any supplier sourcing products made with forced labour, resurfaced in recent days after several Western nations imposed sanctions on China.
This saw H&M criticised by state media, while many users on Chinese social media such as Weibo said recently that they would no longer buy H&M products.
02:38
Global brands face backlash in China for rejecting Xinjiang cotton
The brand has also been removed from all major Chinese e-commerce platforms, while two popular actors have cut ties with the company.
Nike, the US sportswear brand, which also made a statement last year expressing concerns on allegations of forced labour in Xinjiang, faced a similar backlash online.
Meanwhile, Chinese sportswear brand Anta Sports was praised by Chinese netizens for “having backbone” after it announced on Wednesday that it would quit the Swiss-based sourcing governance group, Better Cotton Initiative, and would continue to use cotton produced in Xinjiang.
China is the world’s largest cotton consuming nation and the second largest producer.
It is expected to produce 5.9 million tonnes and import 2.1 million tonnes in the 2020-21 marketing year, according to a note from TF Securities, which cited data from the International Cotton Advisory Committee. Some 87.3 per cent of China’s output originated from Xinjiang last year.
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“We expect more Chinese brands to [say they will] continue to use Xinjiang cotton, which we believe will stimulate a greater propensity to consume domestic brand products,” said TF analysts Sun Haiyang and Fan Zhangxiang on Thursday.
“Besides, Chinese consumers’ aspirations for foreign brands have been falling in recent years … They are no longer buying solely because of the brand names.”
Half of the top 10 brands in China’s clothing and footwear market are foreign, including Nike, Adidas and Uniqlo, Zheshang Securities’ note said, citing data from market research consultancy Euromonitor International.
Not all analysts are convinced. The Chinese brands’ rally may not be sustained, said Louis Tse Ming-kwong, managing director of Wealthy Securities.
“This dose of patriotism is an excuse [for retail investors] to go in and do a bit of speculation,” he said. “In a few days the share prices may come down again [as investors] go back to the fundamentals.”
Additional reporting by Martin Choi
