Even at Times of Shaky Market Confidence, Individual Firms Have Continued to Do Well in China
Sure, Chinese growth has slowed, but behind the headlines there’s a bigger story: economic evolution. China’s transition away from an investment-led economy toward an economic structure more reliant on consumption is well underway. Chinese consumers have continued to serve as a relatively resilient source of sales and earnings growth for market leaders. In a variety of sectors, high-quality domestic firms and multinationals have continued to thrive.
As the economy transitions, further market setbacks are possible. Meanwhile, broader confidence in the “emerging markets story” remains fragile as investors fret about the global impact of higher U.S. interest rates. And yet, for active investors, market weakness may create the possibility of investing in high-quality companies at compelling valuations. Arguably, the environment is ripe with opportunities for selective investors who maintain a long-term perspective.
China’s consumer economy is not immune to broader weakness. Slower growth overall may act as a headwind for consumption. That said, leading firms can continue to distinguish themselves. For investors, being selective is the key. Sports and fashion wear, travel and tourism, insurance and pharmaceuticals are some of the main areas where market leaders may continue to see solid sales growth over time.
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