China's footballers didn't make it to the World Cup finals, but investors hope the event, and more money in consumers' pockets, will help boost home-grown sports brands such as Anta and Li Ning.

But the sportswear makers also face challenges such as a perception of poor quality, and face tougher competition from foreign brands such as Nike and Adidas who are keen to crack the potential of China's mass market.

Slam Dunk
One positive for China's sportswear brands is strong domestic consumption, backed by government incentives and rising wages.

Chinese retail sales rose 18.7 percent in May from a year earlier and have been creeping up since late last year. Credit Suisse reckons China is on track to eclipse the United States as the biggest consumer market within a decade.

The buying power of young consumers is rising and, as sports such as basketball gain popularity, sportswear sales are expected to increase.

Alex Fan, head of research of ICBC International, predicts stable annual earnings growth for Chinese sportswear companies of over 20 percent in the coming years.

According to UBS, China's sports footwear market could reach 69 billion yuan ($10.1 billion) this year, while the branded sports footwear market could be close to 300 billion yuan by 2020. Market research firm Euromonitor estimated China's footwear market at 60 billion yuan in 2009.

Anta Sports and Li Ning, two of China's top sports brands, see strong fourth-quarter order growth of 25 percent and 20 percent, respectively.

Anta's share price has risen by more than half in the past year. Shares in Li Ning, an official marketing partner of the National Basketball Association and founded by a former Chinese gymnast who won three gold medals at the 1984 Los Angeles Olympics, are up about 25 percent in the past year.

"The market had doubts if the strong growth (of sportswear makers) could be maintained, but now it's proven to be sustainable," said Renee Tai, analyst at CIMB-GK Research.

High growth in China's untapped lower-tier cities should support smaller players such as Xtep , 361 Degrees and Flyke . (Reuters)