China Goes From Game Clampdown to Sports Boost and Stocks Soar
(Bloomberg) -- China’s beleaguered equity investors got some welcome relief Wednesday when the government’s latest policy agenda for a healthy nation spurred market gains after recent losses.
Shares of sneaker makers and other sports companies jumped as Beijing launched an effort to increase the numbers of fitness trainers and people exercising regularly over the next five years. Li Ning Co. rose 5.7% while Anta Sports Products Ltd. advanced 4.7%, with both Hong Kong-listed sportswear makers touching fresh highs intraday.
China’s plans to boost sports spending in the run-up to the 2022 Winter Olympics is providing a bright spot for frazzled traders who have seen a raft of new rules spark selloffs in a number of sectors from education to technology. President Xi Jinping’s attempts to address inequality in the Chinese economy is causing investors to rethink their playbooks for two of region’s biggest stock markets.
“We believe with increasingly sophisticated facilities and guidelines to call for sports participation, China is well positioned to grow its sports industry,” Goldman Sachs Group Inc. analysts including Michelle Cheng wrote in a note. The firm maintained a buy rating on Li Ning and Anta, saying both should benefit from industry growth and the “China-chic trend”.
The pledge to promote the sports industry stands in stark contrast to recent attacks on the education and technology sectors as China looks to rein in private enterprises it blames for exacerbating inequality, increasing financial risk and challenging the government’s authority. On Tuesday, state media attacked the “spiritual opium” of the video game industry, which sent shares of Tencent Holdings Ltd. and other related names tumbling.
The State Council plan reiterated a goal of boosting the sector to 5 trillion yuan ($774 billion) by 2025, a 70% increase from 2019 levels.
“It helps to fill in the vacuum left by the crackdown on the after-school education business,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management. “It also helps to address the rising unemployment rate of the young population.”
China plans to increase the percentage of people participating regularly in physical activity to 38.5% by 2025, from 37.2% in 2020, according to the plan. That refers to doing exercises with a moderate intensity at least three times a week, with each session lasting at least 30 minutes.
Some other measures listed in the plan include building and renovating more than 2,000 sports parks, fitness centers and public sports stadiums, and cultivating a group of “specialized” small and medium-sized companies in the fields of fitness facilities, sports event organization and fitness equipment manufacturing.
Sportswear has been a safe haven this year as the crackdowns on fintech, real estate and overseas listings weighed on the broader market. Li Ning has surged more than 70% and Anta almost 50%, crushing the performance of the Hang Seng Index which is down 3%.
The sports sector has also benefited from a wave of nationalism in response to to the Xinjiang cotton controversy and excitement over the return of the Olympics and other sporting events.
Among other stocks getting a boost Wednesday, retailer Topsports International Holdings Ltd. jumped 7.8% in Hong Kong. On the mainland, Lander Sports Development Co., China Sports Industry Group Co. and Jiangsu Jinling Sports Equipment Co. all jumped by their daily limits.
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