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Replies to post #10784 on The Rising Influence of Rising Affluence
09/25/15 11:45 AM
Nike’s results illustrate the challenge of trying to put a macroeconomic lens on stockpicking. With 10% sales exposure to China, Nike could certainly land in a bucket of stocks being shunned because of the slowdown there, alongside companies like Yum Brands, or the host of chipmakers that generate a significant portion of their sales in China.
…Nomura analyst, Robert Drbul projects fiscal 2016 revenue growth of 17% in China and argues “the region has now entered a ‘new normal’ of exceptional brand strength and productivity.”
10/02/15 12:36 PM
In China today, there are two economies. One is sinking, while the other, if not flourishing like before, is still afloat.
...China’s heavy-manufacturing, resource-extraction and construction industries are in recession. But other sectors, including services like travel, dining and e-commerce, are still growing at respectable rates. [Pharmaceuticals too.]
…The divide is also geographical. China has a new emerging rust belt in the frigid northeast, the heart of the old, state-owned industrial complex. In the first half of 2015, three provinces in China had negative nominal GDP growth, according to Andrew Batson and Chen Long, analysts at research firm GaveKal.
…But the major cities of Beijing, Shanghai and Shenzhen, where white-collar workers congregate, and some provinces in the wealthier southeast, are still growing at nominal rates exceeding 7.5%, according to GaveKal.
This explains why some U.S. companies, like construction equipment-maker Caterpillar, are reporting terrible China sales, while others, like Nike, Apple and Starbucks, still see rapid growth. Steelworkers and coal miners may be suffering, but urban professionals are still splurging on sneakers and premium smartphones.
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