Textile Stocks' Outlook Unclear As End to Global Quotas Nears
Garment makers and clothes-trading companies that operate in China are hailing the expiration of the strict quota system that governs global textile trade. Yet, few investors are piling into their stocks.
The anticipated elimination on Dec. 31 of the quota system, designed in the 1960s to regulate the fragmented international textile industry, will cut costs along the global clothing supply chain by up to 40%, according to industry analysts and executives. But uncertainty over the U.S. government's response to a potential flood of inexpensive clothing made in China and the emergence of homegrown Chinese competitors complicate the case over the next 12 months for buying textile-sector stocks in Hong Kong.
"The elimination of [the quota system] is very similar in ways with what happens with airline or telecom deregulation," says Christopher Palmer, fund manager at Gartmore Investment, London. "There could be quite a drastic shakeout. It's already becoming more of a rough-and-tumble business."
Under current rules, importing nations such as the U.S. allocate textile import quotas to various nations. Individual clothing manufacturers then purchase quota from those governments, which allows them to export their product.
No longer having to buy quota, means that Hong Kong-based garment and textile makers that manufacture in China, including Texwinca Holdings, Fountain Set (Holdings) and Victory City International Holdings, should be able to cut hefty costs. The savings, along with an expected rise in orders, will help boost profits, analysts say.
Declines of 10% to 30% in overall apparel costs will occur at a rapid pace, according to Jeanine Angell, Asian consumer analyst at Merrill Lynch, Singapore. For instance, the cost-savings on a pair of blue jeans from factory to point of sale should be on the order of 36%; the figure on other types of apparel could be up to 40%, says Andrew Kuet, head of small-cap research at ING Financial Markets, Hong Kong. Of the total savings, it is likely that manufacturers will pocket 1% to 2% and retailers will keep 6% to 7%, leaving consumers the biggest winners, he adds.
The savings also will come from the improved efficiency of being able to make more clothes in China, which industry experts, analysts and investors agree will be the greatest beneficiary of the quota expiration in the long run. There, manufacturers can integrate many aspects of clothing production, from sourcing fabric at local mills to embroidering, dying, sewing and packaging. Hong Kong garment companies, which trade at valuations ranging from 10 times to 20 times forward earnings, are cheaper than most of their counterparts elsewhere, and are well-positioned to integrate this way, analysts say.
"The direct impact on Hong Kong textile stocks seems to be very good because their costs come down and the export market should open up completely," says Elizabeth Soon, head of Pacific Basin investments in Hong Kong for Scotland's Standard Life Investments. "But it's very hard to say they're a very 'strong buy' in the short term because of competition and the potential antisurge measures from the U.S.," she says, adding that she owns only a few Hong Kong textile stocks because they tend to be relatively small in size with a limited number of shares available for trading.
Increasing calls from textile-industry groups in the U.S. and elsewhere are fanning concerns that the Bush administration will impose so-called antisurge, or safeguard, measures to limit Chinese apparel exports to the U.S. Such measures could sharply affect the operating profits of Hong Kong companies that have ramped up their capacity in China in anticipation of a spike in orders. J.P. Morgan Chase is projecting 20% growth in orders in terms of volume in 2005.
Pressure on the U.S. government -- and on Hong Kong textile companies, which are among the biggest in the world -- is growing. Last week, U.S. sock manufacturers petitioned the Bush administration to cap Chinese imports of socks, while the European Union raised restrictions on Chinese clothing imports in an effort to help other garment-exporting nations such as Bangladesh, Laos and Cambodia. In an apparent bid to head off criticism, a senior Chinese commerce official said last week in a speech that Chinese companies are increasing investment in garment industries in developing countries, which fear competition from China's massive textile-export sector.
Until the quota is lifted and enough months have passed to gather trade data, nobody can predict the timing or extent of the U.S. reaction, if any. But it is clear that the impact of other U.S. restrictions has hurt textile share prices, as they have in the past. Shares in Hong Kong companies with operations in China dived in November after Washington said it would limit Chinese shipments of bras, knitted fabric and dressing gowns. Suffering also from surging cotton prices, Texwinca and Fountain Set, which together make about half of the world's knitted cotton fabric, have since recouped their stock-price losses but analysts anticipate more volatility ahead.
"The big wild card in this is just how strong the U.S. is going to fight on behalf of the smaller countries for the transitional period," said Mr. Palmer. "That could lead to a lot of underutilized capacity in China while Honduras, the Solomon Islands and others shut down their industries."
U.S. and other textile groups can't fight China forever, though, and eventually restrictions will be lifted. A longer-term issue is competition from China's mills, which already are the biggest yarn-spinners in the world. Last year, these mills produced 18 million tons of fabric, or about 30% of the world's total, and Chinese fabrics and garment exports topped $80.4 billion, or 17% of the global total. In the first quarter of this year, China's textile and garment trade with the U.S. was in surplus to the tune of $15.65 billion, up 29% from the year-earlier period.
Nearly every province in China has at least one textile mill, and it is only a matter of time, some investors say, before foreign investors will be able to choose between buying shares in Chinese companies along with Hong Kong textile stocks. Weiqiao Textile, which is China's biggest cotton-textile maker based in northeastern Shandong province and is listed in Hong Kong, is currently the only direct China textile stock traded overseas. Shares in Weiqiao, which has a joint venture with Japanese trading company Itochu, have risen 23% since the company was listed in September, but they are down 15% from their February high. Anhui Huamao Textile and Shanghai Haixin Group are listed Chinese mills, but they are only available to so-called qualified institutional investors who are foreigners approved to invest in China's stock markets.
"It'll be no surprise that people in a Chinese mill will figure out how to contact a [retailer] in New York by themselves and cut out the middlemen and higher-cost producers in Hong Kong," says Mr. Palmer. "Over the next decade," he adds, Chinese mills "will continue to pose a serious threat."
纺织类股前景难测
中国的服装生产商和贸易商正在因为压制全球纺织品贸易的严格配额制度的取消而欢呼雀跃。然而眼下却鲜有投资者问津纺织类股。
行业分析师及业内管理人士称，配额制度的取消将使全球服装供应链节省多达40%的成本。诞生于二十世纪六十年代的纺织品配额制度旨在对全球纺织行业进行统一的规范，如今伴随全球贸易一体化进程的快速发展，这一制度已经完成其历史使命，将于今年12月31日寿终正寝。但美国政府对中国廉价服装潮水般的涌入以及中国本土竞争对手的不断涌现会作出怎样的反应眼下尚不得而知，因而未来12个月香港市场纺织类股的走势也就变得扑朔迷离。
伦敦Gartmore Investment的基金经理克里斯托福?帕默(Christopher Palmer)说，配额制度的取消与航空或电信行业的放松管制非常类似。这可能会引发一次不小的动荡。该行业已经开始处于混战状态。
根据现有的规定，像美国这样的进口国会向各国分配纺织品进口配额。服装生产商必须从这些政府购买配额，然后才得以将产品出口。
分析师称，配额制度取消后，众多将生产业务设在大陆的香港服装和纺织品制造商将得以大量削减成本。成本的节约加上预期中订单的增加有助于它们大幅提高利润。这类制造商包括德永佳集团(Texwinca Holdings Ltd., 0321.HK)、福田实业(Fountain Set (Holdings) Ltd., 0420.HK)和冠华国际(Victory City International Holdings Ltd., 0539.HK)等。
美林公司(Merrill Lynch)驻新加坡的亚洲消费者分析师珍宁?安吉尔(Jeanine Angell)说，整体的服装成本将很快下降10%-30%。ING Financial Markets驻香港的小型股研究部负责人安德鲁?屈特(Andrew Kuet)说，一条蓝色牛仔裤从生产厂到达销售点的过程中成本将节约36%左右；其他类服装的相应成本将最多节约40%。节约下来的成本中的1%-2%将进入制造商的腰包，零售商会得到6%-7%，其余部分将尽归最大的受益人－－消费者。
配额制度的取消还将使中国的生产厂家生产更多的服装，从而通过生产效益的提高而进一步削减成本。从长远看，中国将成为取消配额制的最大受益者，这一点已经成为业内专家、分析师和投资者的共识。在中国，制造商可以整合服装生产过程中的各个环节，从本地布料采购到印染、缝制和包装，从而使得整个生产流程的效率大大提高。分析师称，本益比只有10-20倍、远远低于其他同行的香港服装公司早已为这种整合做好了准备。
Scotland's Standard Life Investments驻香港的太平洋地区投资负责人伊丽莎白?素恩(Elizabeth Soon)说，这对香港纺织类股的直接影响似乎很好，因为这些公司的成本将有所下降，出口市场将完全放开。但很难说短期内纺织类股会获得强劲买盘，因为同时竞争也将日趋激烈，并且美国很可能会想方设法实施各种保护性措施。她同时表示，她只持有少量香港的纺织类股，因为它们市值相对较小，可供交易的股票数量有限。
来自美国和其他地区纺织行业组织的呼吁使得人们日益担心布什政府可能为限制中国服装出口而采取保护性措施。这种措施可能会严重影响香港公司的运营利润，因为它们已经基于订单增长的预期在大陆疯狂扩充产能。摩根大通(J.P. Morgan Chase)预计2005年订单数量将增长20%。
美国政府以及那些规模处于世界前列的香港纺织品公司目前所面临的压力与日俱增。上周，美国袜子生产商呼吁布什政府限制中国的袜子进口，同时欧盟也加强了对中国服装进口的限制，以扶持孟加拉、老挝和柬埔寨等国的服装出口。为了不让中国成为众矢之的，上周中国商务部一位高级官员表示，中国公司正在增加对发展中国家的服装行业投资，以防中国庞大的纺织品出口行业竞争过于激烈。
虽然人们都很想知道美国政府采取相应措施的时间和力度，但在纺织品配额最终取消并在数月后得到相关的贸易数据前，无人能够就此作出预测。但有一点非常明了，美国的其他限制措施已经对纺织类股构成打击。去年11月，在布什表示将限制中国的胸罩、针织品和晨褛进口后，在大陆运营的香港公司的股价大幅下挫。再加上棉花价格上涨，德永佳集团和福田实业的股价已跌去近半，但分析师预计还可能有更大波动。这两家公司产品合计占据了全球棉织品市场的半壁江山。
帕默说，很大的变数在于转型期间美国代表小国利益进行抗争的力度。美国的保护性措施将导致中国出现大量产能闲置，而洪都拉斯、所罗门群岛和其他地区的一些服装制造商也将因此关闭。
但美国和其他纺织业集团不能永远与中国对抗，这些限制最终还是会被取消。长期的问题在于中国纺织厂之间的相互竞争问题，它们已经成为全球的纺织巨头。去年，中国纺织厂生产织物1,800万吨，占全球总量的30%，中国的织物和服装出口额超过804亿美元，占全球织物和服装出口总额的17%。今年第一季度，中国相对美国的织物和服装贸易顺差达到156.5亿美元，较上年同期增长了29%。
中国几乎每个省都至少有一家纺织厂，对部分投资者而言，外国投资者选择中国或香港纺织类股是迟早的事情。
中国最大的棉织物生产商魏桥纺织(Weiqiao Textile Co. Ltd., 2698.HK)是目前唯一一家直接在海外上市的纺织类股。该公司总部设在山东省，目前在香港上市，并与日本贸易公司伊藤忠商事株式会社(Itochu)组建了一家合资公司。自去年9月份上市以来，该股迄今已上涨23%，但距2月份创下的高点还有15%的距离。安徽华茂纺织股份有限公司(Anhui Huamao Textile Co. Ltd., 000850.SZ, 简称：华茂股份)和上海海欣股份有限公司(Shanghai Haixin Group Co. Ltd., 600851.SH, 简称：海欣股份或海欣B股)在中国大陆上市，但在外国投资者中只允许所谓的合格境外机构投资者(QFII)进行交易。
帕默说，有朝一日中国的纺织厂会盘算著如何撇开中间商和高成本的香港制造商，自己直接与纽约的零售商取得联系，出现这种情况一点也不奇怪。他补充说，未来十年中，中国的纺织厂仍将是严重的威胁。
