Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money

67% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

  • Industry Spotlight
  • disruptive innovation

Are Nike and Adidas share prices under pressure from China stocks?

The Nike [NKE] and Adidas [ADS.DE] share prices could face growing pressure from the success of China’s leading sportswear brands such as Li-Ning [2331.HK] and Anta Sports [2020.HK]. Shares in Li Ning are up 181.7% in the past 12-months (through 20 August), while Anta Sports has risen 95.6% over the same period.

As it stands, the world’s leading sportswear companies, Nike and Adidas, are still China’s top two sportswear brands, with a 43% share of the market in 2020, according to Euromonitor International, reports The Wall Street Journal. However, there’s no disguising the rise of Chinese brands, with Anta’s domestic market share, for example, climbing from 11% in 2017 to 15% in 2020. Meanwhile, Li Ning’s operating profit has been growing every year since 2015, accelerating by fourfold in the first half of this year from two years ago, reports the WSJ.

43%

Nike and Adidas' share of the China market in 2020

 

How are Nike and Adidas share prices performing?

Despite falling 1.70% between 16 and 20 August, Nike’s share price is still performing well, up 19.76% year-to-date and 52.88% over the last 12 months, as of 20 August’s close.

On the other hand, the Adidas share price has performed less impressively across the same time periods. Having also slipped back by 5.4% last week (through 20 August), the stock has fallen 2.5% in the year-to-date but is up by a modest 17.4% over the last year.

 

What’s propelling China sports stocks higher?

There are several tailwinds propelling China’s sportswear sector higher, not least the Chinese government’s new five-year fitness programme, which will see the building of new facilities to encourage more people to exercise. Its goal is to grow the sports industry by 70% from 2019 to 2025, making it worth CNY5trn ($772bn) in four years’ time, reports The Wall Street Journal. This kind of state-backing can only be a positive for local sportswear manufacturers, though non-domestic brands could also benefit, and therefore offer support for both the Nike and Adidas share prices.

$772billion

Estimated valuation of the sports industry in China in 2025

 

A backlash against foreign brands has also boosted Chinese stocks. Clothing brand H&M, which has over 400 stores in China, came under pressure earlier this year after state media and social media users accused the retailer of spreading rumours and smearing China over a statement on forced labour in China’s northwest Xinjiang region. Searches for H&M’s name on China’s major e-commerce platforms were blocked, while a social media campaign called for a boycott of the company, reported the WSJ. Two of the fashion company’s Chinese brand ambassadors also cut ties with the company.

Another major reason for the growing popularity of Chinese brands is that, quite simply, its products are of a higher quality and design than was once the case. Local brands are also better placed to market to China’s younger generation than their US and European competitors, using social media channels like Douyin, the Chinese version of TikTok, to interact with customers, reports The Wall Street Journal.

 

What’s the outlook for the Nike and Apple share prices?

In view of the growing level of home-grown competition in China, how do analysts covering Nike and Adidas view the stocks’ respective price targets? The 26 analysts offering 12-month forecasts on the Nike share price have a median target of $184.00, with a high estimate of $214.00 and a low estimate of $157.00. The median estimate represents an increase of 9.66% from 20 August’s close at $167.79. And with 23 buys, two outperform and three hold ratings, the current consensus among investment analysts with CNN is to buy Nike shares.

The US listing of the Adidas share price has a median target of $200.33 among 24 analysts offering 12-month price forecasts, with a high estimate of $221.97 and a low estimate of $170.08. The median estimate represents an upside potential of 13.08% compared with the 20 August closing price of $177.16. Though it’s not as emphatic as with Nike, Adidas has 13 buys, two outperform, 13 holds and one sell rating, giving a current consensus among 29 investment analysts with CNN of buy.

It’s clear that analysts covering the sportswear giants remain bullish, and certainly, their global presence offers reassurance for traders and investors. However, the rise of China’s own sporting brands can’t be ignored, and it will be fascinating to see how this battle develops in the world’s most populous country.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Continue reading for FREE

  • Includes free newsletter updates, unsubscribe anytime. Privacy policy

Free ebook

Tricks of the trade: 7 interviews with the world’s top traders

Get it now

Related articles