One of the experts of the valuation of stocks the media uses is a New York University Professor Aswath Damodaran. If you have not seen his You Tube videos you should, you will learn something. One of the methods of valuation is to determine how much the company with grow, for years if nothing else, companies would point to China. We will capture market share in China.
China tightly controls its reporting, but by all indications the economy is slowing. According to a report by Kevin Yao and Stella Qiu of Reuters, the industrial output fell to a 17 year low. China is increasing assistance to the economy, even though it said it was not going to as Premier Li Keqiang announced hundreds of billions of dollars in addition tax cuts and infrastructure spending. Growth in China is still growing at 5.3% but not the double digit gains of past years. Companies shut down earlier for the Lunar New Year holidays and those that export may open later as orders were curtailed.
In addition, Alexandra Stevenson and Cao Li of the New York Times New Service reported the slowdown is affecting office workers as well as factories. Job fairs have jobs at lower salaries than expected for knowledge workers. At job seeking websites such as Zhillian, the postings have fallen 10% or more. The layoffs suggest that solutions previous offered by the government need to be adjusted. In the past the party allowed the state banks to offer more loans and new highways and infrastructure were built. Other measures will be needed to help office workers.
Linking to dividend paying stocks, for a number of years the world looked to China to grow the world’s economy and resources from around the world have gone to China to the benefit of many companies. With growth in China slowing, companies need to look domestically and to other countries for the magic solution.
There are more questions than answers, till the next time – to raising questions.