HONG KONG, Aug 19 (Reuters) - Shares in China's home-grown sports brands have surged as the fledgling sector benefits from the country's efforts to promote mass participation in sports.

ANTA Sports (2020.HK) shares have more than trebled this year, beating a 41 percent rise on the broader Hong Kong market .HSI, and fashion sportswear retailer China Dongxiang (3818.HK) is up nearly 180 percent.

Shares in rival Li Ning (2331.HK), controlled by ex-Olympic gymnast Li Ning, who lit the flame at the Beijing Olympics opening ceremony, have gained a more modest 90 percent.

Are China's biggest publicly listed sports goods retailers running ahead of the curve, or will they be outpaced by the market's rapid growth?

BUY ON GROWTH

"We see strong growth potential as they are less affected by market downturn because of the huge domestic market," said Conita Hung, head of equity research at Delta Asia Financial.

Leading players are scouring smaller markets to maintain their breakneck growth even as relatively lower affordability in these cities has hit more expensive global brands such as Nike (NKE.N) and Adidas (ADSG.DE)

"Expansion into second- and third-tier cities is definitely a key to drive future growth," said Renee Tai, analyst at CIMB-GK Research.

ANTA Sports posted a 40 percent rise in half-year net profit and raised its network expansion target to 6,400 stores by the year-end from 6,200.

Economists expect a 15 percent rise in nominal retail sales in China in the year to July, the same as June.

"As a key player and relatively high awareness of its brand in China, Li Ning is worth looking at. Though it's a bit expensive at the moment, the PE will come down as it gains market share," said Delta Asia's Hung.

As a profile booster, ANTA has teamed up with the Chinese Olympic Committee to sponsor China's sports delegation between 2009-2012. It also has endorsement deals with tennis stars Jelena Jankovic and Zheng Jie and basketball players Luis Scola and Steve Francis.

"ANTA is seen having an advantage over Li Ning as ANTA has got a sponsorship deal, which helps its brand awareness," said Patrick Yiu, director at CASH Asset Management.

SELL ON HIGH VALUATION

With a price to earnings multiple of over 28 times 2009 earnings, Li Ning is among the most expensive in the sector, versus ANTA's PE multiple of 22 and 19 times for China Dongxiang -- and an average of 20.79 for the broader market.

"I won't recommend touching these stocks as they are expensive even if they have a growth story, in particular in this investment climate," said Alex Wong, director at Ample Finance Group, highlighting inventory control as a concern.

One particular risk is that the retailers could see a significant slowdown if China tightens its monetary policy, following months of big spending under a 4 trillion yuan ($585 million) economic stimulus plan.

"Keen market competition makes the stocks look risky, especially as I don't think the easy monetary policy will remain next year. That means people may tighten their spending," said Andrew To, a sales director at Tai Fook Securities.

(US$1 = HK$7.75 = 6.834 yuan)

(Editing by Doug Young and Anshuman Daga)