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Economy

Apple Stock, and 5 More That Benefit as China’s Economy Surges – Barron's

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A shopping area in Beijing during the October Golden Week holiday.


Kevin Frayer/Getty Images

China’s economic rebound hasn’t relented. Several U.S. stocks stand out as notable beneficiaries.

While most countries’ economies will shrink as a result of the coronavirus crisis, China’s gross domestic product is expected to grow 1.9% for 2020. The country reopened quickly after its lockdowns and got its economy back on track faster than most.

That is great news for companies that sell to China. Data from the investment bank Evercore underscores the point.

The firm runs a weekly survey of 21 U.S. companies—one-third manufacturers of capital goods and chemicals and the rest in consumer products—that export to China, or sell within the country. A “sales to China” index it generates from the data fell to less then 35 in March, but has trended higher since then.

The result on Friday was 56.3, the highest since June 2011.

Evercore doesn’t disclose which companies it surveys, but a strengthening Chinese economy is a powerful benefit for companies with considerable sales there.

Apple is one such company. The stock (ticker: AAPL) is up 127% between March 23, its bear-market low, and Friday. That smokes the 65% the

S&P 500

has gained in that time.

Apple’s long-term earnings growth depends on its fast-growing and higher-margin services business, but rebounding Phone sales offer a near-term benefit as well. The stock recently jumped in response to news that Apple now plans to produce 96 million iPhones in 2021, for a 30% year-over-year increase.

The Wall Street consensus calls for Apple to sell 215 million iPhones in 2021, for revenue of $165 billion. The revenue figure would amount to an increase of 20% year over year, but Wedbush Securities analyst Dan Ives tells Barron’s that sales estimates are now bound to rise. Much of the apparent strength in demand is coming from China, he said.

“China is tracking above expectations” for the current quarter, Ives said. Apple gets roughly 7% of its revenue from China, according to FactSet estimates, but 20% of iPhone demand is China-based, Ives estimated.

Sales in China account for 16% of

Nike

‘s (NKE) revenue. Expectations that sales there will increase 17% in the fiscal year ending in May have helped the stock to almost double the percentage gain on the S&P 500 since March 23. The stock has also benefited, of course, as higher-margin direct-to consumer sales account for a bigger portion of revenue.


Starbucks

(SBUX). meanwhile, gets more than 10% of revenue from China. Its stock is up 83% since March 23.

The casino operator

Wynn Resorts

(WYNN) receives 70% of its revenue from Macau, the former Portuguese colony and gambling hub, which depends on visitors from the mainland China. The stock is up 167% from its March 18 bear-market low.


Chemours

(CC) sees more than 11% of revenue from China, while

Caterpillar

brings in 5%. Chemours is up 278% from its April 3 low, while Caterpillar has risen 96% since March 23.

“Investors see stable-to-slightly better growth in China next year as they have fewer headwinds from COVID currently and are a beneficiary of global growth and stimulus,” wrote Oscar Sloterbeck, macro research analyst at Evercore, in a research note.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

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Economy

Minimum wage to hire higher-paid temporary foreign workers set to increase

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OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

The Canadian Press. All rights reserved.

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

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OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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Economy

Statistics Canada says levels of food insecurity rose in 2022

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OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

The Canadian Press. All rights reserved.

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