China’s latest move to reverse its zero-Covid policy by scrapping quarantine restrictions on international travelers is the latest leg of the recovery we’ve been waiting for to bolster club stocks weighed down by 3 years of strict pandemic rules. Club names with significant China exposure traded higher on Tuesday’s news. Casino giant Wynn Resorts (WYNN) is up more than 5%, cosmetics company Estee Lauder (EL) is up more than 3% and industrial giant Honeywell (HON) is up 0.54% in midday trade. Wynn’s 2 properties in Macau SAR, China had generated around 70% of the company’s total revenues prior to Covid-19. Estée Lauder relies on China for more than a third of its total sales. And Honeywell, whose diverse range of industrial products includes aircraft cockpits and engines, is a major supplier to what was once the world’s fastest-growing passenger air market. Both Wynn and Estee Lauder are down more than 30% year-to-date, while Honeywell is up more than 3% this year. Chinese authorities last month drastically eased back draconian Covid restrictions that have all but shut down the world’s second-largest economy since the pandemic broke out in early 2020. On Monday, Beijing said international travelers would no longer be required to quarantine upon arrival in the mainland from Aug. 1. That comes days after Macau lifted quarantine restrictions on visitors. The club’s recent move in China to reopen its economy should be a catalyst for multiple club participations. While there are concerns that 2023 will be an overall down year for corporate earnings, companies with significant operations in China will likely have a different story to tell. China is a key growth driver for Estee Lauder, a leader in luxury skincare, makeup and fragrances. The lifting of quarantine restrictions is likely to result in more duty-free airport sales for the cosmetics giant, particularly in the tourist region of Hainan known as China’s Hawaii. Estee Lauder, along with Club Holding Starbucks (SBUX), is poised to capitalize on China easing strict lockdowns to combat Covid outbreaks and allowing more consumers to shop in person on a regular basis. Relaxed quarantine restrictions should also boost the aerospace industry, which has still not fully recovered from the pandemic. An uptick in international flights would be a tailwind for Honeywell, whose aerospace segment is among the higher-revenue, higher-margin ones. Wynn, meanwhile, is a big beneficiary of the China reopening news as the company has an outsized presence in the country through its Macau casinos. This should allow Wynn to improve its earnings and drive growth in the region. (Jim Cramer’s Charitable Trust is Long EL, WYNN, HON, SBUX. For a full list of stocks click here.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling any stock in his charitable foundation’s portfolio. When Jim spoke about a stock on CNBC television, he waits 72 hours after the trade alert is issued before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS GOVERNED BY OUR TERMS AND CONDITIONS AND PRIVACY POLICY ALONG WITH OUR DISCLAIMER. NO OBLIGATION OR OBLIGATION SHALL BE OR CREATED BY YOUR RECEIVING OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC RESULT OR PROFIT IS GUARANTEED.
People are using their smartphones to take photos outside of Wynn Resorts Ltd’s resort on Tuesday 11th January. 30th, 2018.
Billy H.C. Kwok | Bloomberg | Getty Images
China’s latest move to reverse its zero-Covid policy by scrapping quarantine restrictions on international travelers is the latest leg of the recovery we’ve been waiting for to bolster club stocks weighed down by 3 years of strict pandemic rules.