Sports Shoes Maker Eyes Promotion to HK

Article excerpt

Byline: JAKE LLOYD-SMITH

HONG Kong investors are wondering whether there is some spring cleaning in store this month for the territory's benchmark 33-member Hang Seng index. Compiler HSI Services may rejig the basket of stocks, and buyers are trying to second-guess which few companies will have blue-chip status thrust upon them.

Much of the head-scratching has focused on Yue Yuen Industrial, the world's leading maker of sports shoes, level today at HK$15.70. It started the year, however, at only HK$12.65. Although it may not be a corporate name that trips off many people's tongues, its main clients' names do: try Nike, Timberland, Adidas and Reebok.

The cobbler to the world's fitness fans has 250-plus production lines across Asia, turned out more than 130 million pairs of shoes last year and posted a record pound sterling142 million profit.

"A review of the current [Hang Seng] list of constituents is expected to take place within the first two weeks of May, for possible implementation at the end of May," said UBS Warburg. It picked out Yue Yuen Industrial as the leading contender for promotion.

In many ways the company - originally from Taiwan - typifies China's emergence as a manufacturing powerhouse. Yue Yuen's vast factories dot China's industrial landscape, with resident workers crammed a dozen to a room.

Still majority-held by the Tsai family, the company already got a boost this month when it earned inclusion from 30 May in the widely-followed MSCI Pacific ex-Japan index.

It is now the 24th-largest stock in Hong Kong - valued at pound sterling1.9 billion - one of the main criteria for lead index inclusion, along with turnover. …