China’s latest move to roll back its zero-Covid policy by scrapping quarantine restrictions for international travelers is the last leg of recovery we’ve been waiting for to help bolster Club holdings that have been weighed down by three years of stringent pandemic rules. Club names with significant China exposure were trading higher on the news Tuesday. Casino giant Wynn Resorts (WYNN) climbed more than 5%, cosmetics firm Estee Lauder (EL) rose more than 3% and industrial giant Honeywell (HON) ticked up 0.54% in midday trading. Wynn’s 2 properties in the special administrative region of Macao, China, had generated roughly 70% of the company’s total revenue pre-Covid-19. Estee Lauder relies on China for more than a third of total sales. And Honeywell, whose diverse range of industrial products include airplane cockpits and engines, is a significant supplier to what had been one of the fastest-growing passenger air markets in the world. Both Wynn and Estee Lauder are down more than 30% year-to-date, while Honeywell has risen more than 3% this year. Chinese authorities have dramatically scaled back draconian Covid restrictions over the past month that all but shut down the world’s second-largest economy since the onset of the pandemic in early 2020. On Monday, Beijing said international travelers will no longer need to quarantine upon arrival in the mainland from Jan. 8. That comes days after Macao lifted quarantine restrictions for visitors. The Club take China’s latest move to reopen its economy should be a catalyst for multiple Club holdings. While there are concerns that 2023 will be a down year for corporate earnings at large, companies with significant operations in China will likely have a different story to tell. For Estee Lauder, a leader in luxury skin care, makeup and fragrances, China represents a key driver of growth. The lifting of quarantine restrictions should lead to more duty-free airport sales for the cosmetics giant, especially in the touristy Hainan region, known as the Hawaii of China. Estee Lauder, like Club holding Starbucks (SBUX), is also poised to benefit from China abandoning strict lockdowns to combat Covid outbreaks, allowing more consumers to regularly shop in person. Relaxed quarantine restrictions should also boost the aerospace industry, which still hasn’t fully recovered from the pandemic. An uptick in international flights would be a tailwind to Honeywell, whose aerospace segment is one of its higher revenue- and margin performers. Wynn, meanwhile, is a large beneficiary of China’s reopening news given its outsized exposure to the country through its Macao casinos. This should allow Wynn to improve its earnings and execute on growth in the region. (Jim Cramer’s Charitable Trust is long EL, WYNN, HON, SBUX. See here for a full list of the stocks.) As a subscriber to the 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…
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