Why Chinese Sportswear Brand Li-Ning’s Stock Is Red-Hot

Shares for Li-Ning are soaring in 2019.

The Chinese sportswear company’s share price has more than tripled year-to-date — and it’s likely getting a new nudge in recent weeks stemming from the NBA’s fallout with China.

Li-Ning, which trades on the Hong Kong Stock Exchange, saw its shares jump by around 4% last week, as traders appeared to become bullish on the brand after several Chinese companies severed ties with the NBA and state TV decided not to show pre-season NBA games.

The NBA-China conflict started earlier this month when Houston Rockets general manager Daryl Morey tweeted out support for protestors in Hong Kong, who have birthed a “complicated movement about protecting freedoms, democracy and Hong Kong’s” supposedly guaranteed semiautonomous status, The New York Times explains.

Likely in anticipation of heightened interest in the Chinese Basketball Association and a rise in patriotic buying, traders seem to be further betting on Li-Ning. The firm’s shares today closed up 1.17% to HK$25.85 ($3.32) per share, but overall, shares are more than triple the HK$6.84 ($.88) price they traded for at this time last year.

It’s not just Li-Ning that has seen a share bump amid the NBA-China scuffle; other probable factors in China are also at play, such as its growing consumer appetite for branded wares and an expanding middle class. Rival sportswear giant Anta has also enjoyed a sizable boost year-over-year, with shares doubling to HK$70.05 today over HK$31.30 this time in 2018.

Both Anta and Li-Ning have taken China’s side in its NBA feud. Anta announced it would cease a contract renewal process with the league, and Li-Ning is purportedly no longer affiliating itself with the Rockets. But the NBA-China conflict also puts into question high-profile partnerships between the sneaker brands and big-name NBA stars, including a lifetime Li-Ning deal for Dwyane Wade (formerly of the Miami Heat) and a 10-year contract  between Anta and Golden State Warrior Klay Thompson that expires in 2026.

Meanwhile, analysts are guessing that the conflict could be bad news for Nike, which is China’s leading athletic company with a 22% market share, according to a 2016 Euromonitor report.

“Based on what we know, I do not see much danger to Western brands’ sales,” Matt Powell, senior sports industry advisor at The NPD Group told FN. “But if the situation gets worse, they could be pulled into the fight and see sales impacted.”

Notably, Chinese sportswear brands are getting a boost amid the backdrop of a U.S.-China trade war that has seen tariffs from both countries placed on billions of dollars worth of imports.

The two countries reached a partial deal late last week, initiating a pause on a planned increase from President Donald Trump that would have bumped tariffs on $250 billion worth of Chinese goods from 25% to 30% effective today. But a fourth tranche was rolled out by the U.S. Sept. 1 —  imposing a 15% levy on $112 billion worth of goods — and another $188 billion of Chinese products will be subject to tariffs beginning Dec. 15. Meanwhile, China has retaliated by slapping American products with duties ranging from 5% to 10%.

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