Li Ning Leads the Charge of Chinese Luxury Brands

Index Moves is our monthly analysis of the biggest climbs and drops on The Jing Daily KraneShares China Global Luxury Index, which tracks the global market performance of the luxury sector. The Index relies on the Jing Daily Global Luxury Score and Jing Daily Brand Awareness in China Score in addition to fluctuations in market cap and stock closing price. Below, we highlight luxury brand moves for the month ending June 30, 2021.

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A Chinese brand has stormed onto the Jing Daily KraneShares China Global Luxury Index top 10 for the first time.

Previously the ten top-ranked companies on the Index were all European and North American brands. But Li-Ning, a Chinese sportswear brand, changed this on June 28 after racing into sixth place, finishing the month in fifth.

The Beijing-based and Hong Kong-listed company sells sportswear, which isn’t strictly classified as “luxury.” Yet, some sneakers, like its $900 Way Of Wade 9 kicks, appeal to young and wealthy Chinese shoppers, who are increasingly setting the agenda for luxury brands in China.

Li-Ning was buoyed by a positive earnings report last month, as well as a broader demand for sportswear (or athleisure) among Chinese shoppers. A Chinese rival, Anta Sports, finished the month in 13th place after its market capitalization surpassed $60 billion.

These brands’ success has come at a cost, however. “They were all driven up by the Xinjiang cotton incident,” says Ivan Su, an equity analyst at Morningstar. Chinese shoppers started boycotting some Western brands in March following a decision to stop using cotton picked by Uyghurs in Xinjiang after allegations of human rights abuses.

Yet Li-Ning and Anta Sports have kept using Xinjiang cotton in their products. “Ever since that broke out, we have seen very agreeable sales from both of companies,” says Su. “At the same time, we saw Nike and Adidas sales decline quite a lot.”

Most analysts expected the fallout from the cotton incident to last a few weeks or maybe a month. But three months on, it has shown no sign of letting up, despite Nike’s chief executive, John Donahoe, calling Nike “a brand of China and for China” on its earnings call in June.

There are worries that what has happened in the sportswear market could catch on in luxury goods. After all, Burberry was caught up in the Xinjiang cotton incident, as well. The British luxury brand has since fallen from sixth place in April’s Jing Daily KraneShares China Global Luxury Index to off the list altogether.

However, unlike in sportswear, no Chinese luxury fashion or jewelry equivalent has emerged on the Index. And Burberry’s woes were as much caused by last month’s unexpected resignation by its CEO, Marco Gobbetti, as a shift in Chinese purchasing power.

“It’s not like we want to buy clothes with Chinese names on them,” says one luxury consumer in Shanghai. “It’s just that we care less about the origin of the brand and more about the design and image of a brand.”

Thanks to these attributes, European and North American brands still dominate the top spots on the Jing Daily KraneShares China Global Luxury Index. Richemont and Hermès vied for first place throughout June, but it was Apple that ended the month in the lead thanks to a year-on-year boost in iPhone sales of 16 percent.

Meanwhile, the Index as a whole finished the month at its highest peak ever (359), bolstered by expectations that Europe and North America would soon be ending lockdown restrictions, with consumers, once again, being able to shop at stores in person, like the good old pre-COVID-19 days.

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