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A move by the Chinese government on Wednesday to further lift strict Covid-19 measures should boost prospects for a host of Club holding companies with large operations in China, including Estee Lauder ( EL ), Wynn Resorts ( WYNN ) and Starbucks ( SBUX ), all of which burdened almost three years in prison. News China’s National Health Commission announced on Wednesday that people will now be able to travel across the country without showing a negative Covid test or health code. The new rules also allow those with mild or asymptomatic cases of covid to be quarantined at home rather than in certain institutions. In addition, local authorities will no longer be able to stop work or production unless the area is designated as a high-risk area. Beijing’s decision to further ease public health policies comes just over a week after protests erupted in China over the government’s draconian Covid-19 policy, an approach that has severely restricted citizens and pressured the world’s second-largest economy. China has taken minor steps in recent months to ease its Covid restrictions, but Wednesday’s announcement marked the most significant policy shift yet. Impact on club stocks China-exposed club stocks largely followed lower prices in the broader market on Wednesday amid a day of choppy trading in equity and energy markets, fueled by growing recession fears. But ultimately, shares of companies that rely on China for a significant portion of their revenue — Estee Lauder, Wynn and Starbucks — should finally rise as the Chinese economy reopens. We have argued for months that China’s strict stance on Covid is unsustainable in the long term and that a serious swing towards reopening would eventually materialize, providing much-needed clarity to businesses and helping to stimulate economic activity. As a result, we have been patient and held stocks such as Wynn Resorts, which is heavily dependent on its casinos in China’s Macao Special Administrative Region. At the same time, we also know that stocks are forward-looking assets and have decided not to wait for Beijing to fully lift restrictions before investing in Estee Lauder, which relies on China for more than a third of its sales. At the end of September, we bought the cosmetics giant again and we still believe that it is worth buying from us. Similar thinking influenced our decision to open a position at Starbucks at the end of August. Wednesday’s announcement is likely to help China’s economic recovery, so many of the Club’s other holdings are expected to take a hit. On the upside, our energy stocks — Pioneer Natural Resources ( PXD ), Coterra Energy ( CTRA ), Devon Energy ( DVN ) and Halliburton ( HAL ) — are benefiting from higher crude oil prices. Increased demand for oil by world economy no. 2 should ultimately support crude oil, which would have implications for our oil stocks. Apple ( APPL ) is another potential beneficiary of China’s policy change. The iPhone maker has faced production shutdowns at factories in China linked to Covid-19 and warned last November of a potential hit to sales. On Wednesday, Morgan Stanley cut expected iPhone shipments for the December quarter by 3 million units, after cutting forecasts by 6 million units last month due to production disruptions in China. Chipmaker Qualcomm ( QCOM ) also pointed to the impact of China’s Covid policies, saying overall macroeconomic weakness in the country has affected smartphone demand. Increased economic activity in China could benefit Qualcomm in the future. A surge in air traffic in China could be good news for club holding company Honeywell International ( HON ) and its already strong aerospace business. The industrial company makes parts for Boeing ( BA ) and European rival Airbus, which operate in the Chinese market. Honeywell also has a large commercial aerospace aftermarket business, which has benefited from the recovery in international air traffic. China is Procter & Gamble’s ( PG ) second largest market outside the US and has been weighed down by lockdowns due to Covid. The maker of Olay skin care products and Gillette razors continues to bet on China, but management said it needs consumer mobility to recover so long-term growth trends can continue. China’s decision to further ease Covid protocols is positive and we expect further reopening measures to be taken going forward. Of course, Beijing has not officially abandoned its so-called zero-Covid stance, and it is possible that there could be temporary setbacks in response to the surge in cases. But the mid-term announcement nevertheless signals a significant development for China-exposed Club shares. (See the full list of Jim Cramer’s charitable trust stocks here.) As a CNBC Investing Club with Jim Cramer subscriber, you’ll receive a trade alert before Jim closes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charity’s portfolio. If Jim talked about a stock on CNBC, he waits 72 hours after the trade alert is issued before he executes the trade. THE ABOVE INFORMATION IN THE INVESTING CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY TOGETHER WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION OR DUTY SHALL EXIST OR BE CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO PARTICULAR RESULT OR PROFIT IS GUARANTEED.
Although domestic travel in China is still at risk due to Covid-19 outbreaks and prisons, international flights have doubled since June.
Bloomberg | Bloomberg | Getty Images
A move by the Chinese government on Wednesday to further lift strict Covid-19 measures should boost prospects for a host of Club holding companies with significant operations in China, including Estee Lauder (EL), Wynn Resorts (WYNN) and Starbucks (SBUX), and all this was burdened by almost three years in prison.
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MY NUMBER 1 RECOMMENDATION TO LOSE WEIGHT: CLICK HERE
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