China’s hottest investment: Overpriced sneakers

The Shanghai branch of the central People’s Bank of China issued a warning last month about the financial risks of excessive sneaker speculation. (AFP)
Updated 11 November 2019

China’s hottest investment: Overpriced sneakers

  • Enthusiasts worldwide have fueled an expanding bubble in high-priced sneakers, often limited-edition collaborations between big names in sportswear and fashion, rappers or athletes

SHANGHAI: Forget stocks, real estate, even cryptocurrencies — China’s hottest investment nowadays may be the Nike, Adidas, and Puma basketball shoes that “sneakerheads” like Hu Huaiyuan fight to get their hands on.

Enthusiasts worldwide have fueled an expanding bubble in high-priced sneakers, often limited-edition collaborations between big names in sportswear and fashion, rappers or athletes.

But in China the craze is at fever pitch, with devotees driving soaring trading volumes on online “sneaker exchange” platforms, prompting warnings from authorities about dangerous speculation as resale profits approach 5,000 percent.

“The sneaker market is no longer just a game for enthusiasts. Speculators are flocking into the business now,” said Hu, who traveled 300km to Shanghai for the chance to buy the latest Nike Air Jordans.

It is the 23-year-old’s lucky day.

After winning an online lottery for the right to even show up at a Nike store along with around 400 others vying for limited supplies, Hu secured the right to plonk down 1,299 yuan ($186) for a pair.

He plans to quickly “flip” them for double that on a bustling resale market. “If I was not so lucky today, it is possible I would not be able to afford the shoes on the secondary market,” Hu said.

The craze’s appeal owes to two main factors. NBA stars like Michael Jordan have been idolized for years in China, where basketball is arguably the most followed sport, and the associated streetwear culture finds a huge and growing market.

And with Chinese authorities limiting individual stock market price movements to contain volatility, sneakers are embraced by younger investors seeking quick profits in a commodity they can relate to.

“If selling overpriced sneakers proves so worthwhile, why not take it as a good source of income?” said Hu.

The phenomenon is spurring quick growth in Chinese sneaker-trading platforms like Poizon, whose annual volume is around 15 billion yuan, according to Chinese tech consultancy iiMedia Research.

That is more than triple the volume of StockX, a leading US platform.

Platforms like Poizon and Nice also have attracted hundreds of millions of dollars in investment from foreign and domestic venture capital, according to Chinese media reports.

The global market is taking notice. StockX rival GOAT launched an app-like mini-program on leading Chinese messaging platform WeChat in July. StockX executives say they also are crafting China plans.

The Shanghai branch of the central People’s Bank of China issued a warning last month about the financial risks of excessive sneaker speculation, and government-controlled media portray the phenomenon negatively.

According to data-mining company iiMedia research, China’s secondary market for sneakers has passed $1 billion this year and is one of the fastest-growing components of a $6 billion global market led by the US.

However, fear of government intervention has forced app-based platforms like Poizon and Nice to take various steps to cool excess speculation.


OPEC, allied nations extend nearly 10M barrel cut by a month

Updated 31 min 47 sec ago

OPEC, allied nations extend nearly 10M barrel cut by a month

  • The meeting, originally scheduled for next week, was brought forward to Saturday

VIENNA: OPEC and allied nations agreed on Saturday to extend a production cut of nearly 10 million barrels of oil a day through the end of July, hoping to boost energy prices hard-hit by the coronavirus pandemic.
Ministers of the group and outside nations like Russia met via video conference to adopt the measure, aimed at cutting out the excess production depressing prices as global aviation remains largely grounded due to the pandemic. It represents some 10% of the world's overall supply.
However, danger still lurks for the market. Algerian Oil Minister Mohamed Arkab, the current OPEC president, warned attendees that the global oil inventory would soar to 1.5 billion barrels by the mid-point of this year.
“Despite the progress to date, we cannot afford to rest on our laurels,” Arkab said. “The challenges we face remain daunting.”
That was a message echoed by Saudi Arabia's Oil Minister Abdul Aziz bin Salman, who acknowledged “we all have made sacrifices to make it where we are today.” He said he remained shocked by the day in April when U.S. oil futures plunged below zero.
“There are encouraging signs we are over the worst,” he said.
Russian Energy Minister Alexander Novak similarly called April “the worst month in history” for the global oil market.
The decision came in a unanimous vote, Energy Minister Suhail al-Mazrouei of the United Arab Emirates wrote on Twitter. He called it “a courageous decision and a collective effort deserving praise from all participating producing countries.”
OPEC has 13 member states, including Saudi Arabia. The additional countries part of the plus-accord have been led by Russia, with Mexico under President Andrés Manuel López Obrador playing a considerable role at the last minute in the initial agreement.
Crude oil prices have been gaining in recent days, in part on hopes OPEC would continue the cut. International benchmark Brent crude traded Saturday at over $42 a barrel. Brent had crashed below $20 a barrel in April.
The oil market was already oversupplied when Russia and OPEC failed to agree on output cuts in early March. Analysts say Russia refused to back even a moderate cut because it would have only served to help US energy companies that were pumping at full capacity. Stalling would hurt American shale-oil producers and protect market share.
Prices collapsed as the coronavirus and the COVID-19 illness it causes largely halted global travel. That also hurt US shale production, drawing the ire of President Donald Trump. But Trump welcomed the earlier deal, as US Energy Secretary Dan Brouillette did on Saturday with the extension.
“I applaud OPEC-plus for reaching an important agreement today which comes at a pivotal time as oil demand continues to recover and economies reopen around the world,” Brouillette wrote on Twitter.
Under a deal reached in April, OPEC and allied countries were to cut nearly 10 million barrels per day until July, then 8 million barrels per day through the end of the year, and 6 million a day for 16 months beginning in 2021.
However, some countries produced beyond their quotas set by the deal. One of them was Iraq, which remains decimated after the yearslong war against the Islamic State group.
On Saturday, Iraq Oil Ministry spokesman Assem Jihad said in statement that Baghdad had “renewed its full commitment” to the OPEC+ deal.
“Despite the economic and financial circumstances that Iraq is facing, the country remains committed to the agreement," Jihad said.
Analysts had expected OPEC and the other nations to extend the cuts of 10 million barrels per day by one more month, but not longer, since the level of demand is still fluctuating.
“If the demand is great, countries like Russia will want to produce more oil, so they probably won’t want to get locked into a longer-term deal that may not help them,” said Jacques Rousseau, managing director at Clearview Energy Partners.