Soft post-Covid economic activity in China could bring on more stimulus support there — a move that would be a boost for Estee Lauder (EL), Starbucks (SBUX) and Wynn Resorts (WYNN). These are companies in our Club portfolio with considerable exposure to the world’s second-largest economy. Mixed messages Worries about the Chinese economy have already prompted China’s central bank to cut a key policy interest rate . Tuesday’s rate reduction, the first such move since August, came after China’s state-owned banks last week cut rates for depositors. China’s economy has been struggling to reach its full growth potential after Beijing abandoned its zero-Covid policy. The recovery in China has been much slower than what other major countries experienced when they lifted their pandemic restrictions. It shows in many of China’s important sectors. Real estate activity — which is estimated to make up nearly 30% of Chinese gross domestic product (GDP) — has seen slower home sales , unfinished projects by developers, and homebuyers stopping their mortgage payments. New home sales in China for the week ended May 28 increased by 11.8% from a year ago, a significant slowdown from 24.8% growth a week earlier, according to a report by Nomura’s chief China economist Ting Lu. Moreover, China’s new home prices fell 0.01% month-over-month in May after rising 0.2% in April, according to survey data from the China Index Academy. China’s labor market is also struggling. Official Chinese data shows urban unemployment among 16- to 24-year-olds rose to a record high of 20.4% in April — about four times more than the broader unemployment rate in the country. Still, the Chinese consumer has proved to be resilient in the face of these broader economic challenges. China’s April retail sales of consumer goods increased by 18.4% year-over-year , according to the National Bureau of Statistics of China, a sharp increase from March’s 10.6% increase . To start the year, China’s economy in the first quarter saw robust growth — a better-than-expected reading of 4.5% , according to China’s National Bureau of Statistics. It marked the fastest pace of growth since the first quarter of 2022, fueled by higher spending from Chinese consumers. Club stock results Recent financial results from our China-exposed companies show that Chinese consumers have been holding up even as broader economic recovery is delayed. Gaming company Wynn Resorts delivered a strong first quarter in early May, driven by a recovery in the Asian gambling hub of Macao, giving us confidence that robust consumer spending on travel and experiences will continue in the quarters to come. We also added to our WYNN position earlier this month after a new Covid wave hit China, which dragged shares lower. But we saw the pullback as a buying opportunity and upgraded the stock to a 1 rating . Coffee giant Starbucks issued a strong fiscal second quarter last month, driven by positive growth in China for the first time…
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