But one company that could benefit is Yum! Brands.
Morgan Stanley’s John Glass says the benefits of wage inflation outweigh the costs of margin contraction:
Higher aggregate wages in China are likely to be a net positive for YUM’s same-store sales and valuation in our view. Investor concern over potential margin contraction in China in 2011 fails to incorporate the greater positive of demand creation from greater wage growth. Unlike food inflation –the concern just a quarter ago but now less of an issue—wage growth has a real, tangible benefit as it encourages consumption and spurs restaurant demand. We are raising our price target slightly to $56 from $54.
Here’s a few bullish charts.
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