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Profitable flame for Li Ning

(China Daily/Agencies)
Updated: 2008-08-18 14:37

Former Chinese gymnast Li Ning was $30 million richer last Monday when shares in his company soared thanks to a starring role at the Olympics opening ceremony, when he was hoisted by cables to light the cauldron with an Olympic torch, signaling the start of the Games.

Investors snapped up shares in his Hong Kong-listed sportswear firm, Li Ning Co Ltd, hoping that global recognition would follow the spectacle of the opening ceremony.

Audiences around the world gave rave reviews to the extravaganza of thundering drums and fireworks, which ended with a heart-stopping climax when Li simulated a race in mid air to set the giant Olympic cauldron ablaze.

Although the impact on sales of Li Ning's clothing line may be hard to gauge, shares in the firm shot up 5 percent last Monday morning to HK$18.5 ($2.37). The shares were steady all last week, though Hong Kong's benchmark Hang Seng Index dropped around 5 percent during the same period.

Li controlled 266.8 million shares of the firm as of July 11, including through a company jointly owned with his brother, according to Thomson Reuters data.

The paper gain of $30 million for the former gymnast who won six medals at the 1984 Los Angeles Olympics, follows a 3.7 percent share price rally on the day of the opening ceremony as rumors swirled that he would be featured in the ceremony.

The stock is down 34 percent this year, in line with falling stock markets, after more than doubling in 2007.

"I think it actually has more to do with hype," says Germaine Khong, a Hong Kong-based analyst at brokers CIMB. "There's a risk of over-expansion in the Chinese sportswear market, but Li Ning is the short-term beneficiary of the Olympics."

Li Ning, which says it wants to be one of the world's top five sports brands by 2018, is supplying sportswear for the Olympic teams from China, Spain and Sweden.

The brand's logo is similar to the Nike swoosh, although the company says it represents Li Ning's initials and his dynamism on gymnastics apparatus. Li Ning's motto of "anything is possible" also echoes Adidas' "impossible is nothing" slogan.

Li Ning did not pay to be a Beijing Games sponsor, but the firm struck a deal that would have resulted in staff on State broadcaster CCTV wearing the company's logo during Olympic broadcasts. The deal was off, however, after Li Ning was accused of ambush marketing.

With a 10.5 percent share of China's sportswear market, Li Ning is keen to catch up to Adidas's 15.6 percent and Nike's 16.7 percent, and a dose of national pride could help.

Chinese media acclaimed the opening ceremony as a moment when national achievements and ambitions won acceptance on a world stage.

"This great performance was a brilliant distillation of 5,000 years of glorious history," a commentary on the website of the People's Daily said. "China will embrace the world with openness, self-confidence and warmth."

Li Ning won the most medals of any athlete at the 1984 Los Angeles Olympics, returning home from China's first participation in a Summer Games for 32 years with three golds, two silvers and a bronze.

"Li Ning is our Olympic gymnast and his brand is China's most famous so I like to support them," a student at the South China Agricultural University says, sitting in Guangzhou's chic Shangxiajiu shopping area.

The student, whose given name Aihua means "love China", is among a growing number of China's young consumers who are buying Chinese sportswear from home-grown brands, such as Li Ning and Anta.

"They understand the Chinese market better than international players, and their prices are lower," says Rui Wu, an analyst at JP Morgan. "Li Ning is definitely the market leader because it started earlier than the others."

The Chinese sports market has become one of the fastest developing markets around the world with a double-figure annual growth rate, and it is expected to grow to $7.2 billion in 2009 from $3.84 billion in 2006, according to Shanghai-based brand strategist ZOU Marketing.

Analysts say the sportswear sector is a good way for investors to benefit from China's surging consumer boom. Retail sales in the country jumped 17 percent last year to $1.3 trillion as increasingly well-heeled Chinese took an interest in better products and lifestyles.

Li-Ning Co announced recently that it has tied up with French tire producer Michelin to start technical cooperation to produce high-performance sports shoes.

According to the agreement, Michelin's tire techniques will be used for the soles of Li-Ning brand shoes in order to provide sports footwear with stronger grip and wear resistance.

Elie Chkaiban, director and general manager of Michelin Lifestyle Ltd, says the company promotes travel and sports products other than Michelin tires.