New economic data out of China on Wednesday shows the world’s second-largest economy is still struggling to bounce back from the pandemic. Until its government gets serious about announcing a consumption-driven stimulus plan, it could spell more bad news for U.S. companies that generate lots of sales in China, including three in the portfolio: Starbucks , Estee Lauder and Wynn Resorts . China’s GDP for the last three months of 2023 grew by 5.2%, according to China’s National Bureau of Statistics. That missed the 5.3% growth estimate in a Reuter’s poll . GDP growth for the full year was also 5.2%, which met the Chinese government’s expectations. Retail sales also missed, rising 7.4% for the fourth quarter, below the 8% target in the Reuters poll. The economic picture isn’t expected to brighten any time soon. GDP growth is forecasted to slow to 4.6% in 2024, Reuters reported. Meanwhile, youth unemployment remains stubbornly high, at 14.9% for people aged 16 to 24 years old, excluding college students. China’s central bank has tried to stimulate economic activity by cutting its lending benchmark loan prime rate a couple times in 2023 . But the latest disappointing economic data puts pressure on policymakers to act again to boost the economy. Things may have to first get worse before they get better. What does that mean for our three stocks that are very tied to China’s recovery? Not surprisingly, shares of Starbucks, Estee Lauder and Wynn Resorts fell Wednesday, by 1%, 2.6% and 3.5%, respectively. However, we are not day traders. The 2023 bounce back from Covid-19 restrictions did not go as expected, but we believe the stocks’ declines already reflect China headwinds and that the Chinese economy will regain its footing in time. We are also focused on the fundamentals of our holdings and ask ourselves: Has anything else changed significantly enough for us to cut bait here? Starbucks is a tough to own right now. The coffee giant is taking arrows from all sides ,…
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