Estee Lauder (EL) and other club holdings with significant exposure to the Chinese economy rallied on Friday after it was announced that BioNTech’s (BNTX) Covid vaccine will soon be available to foreigners living in China. We’re cautiously optimistic on vaccine development, adding to hopes that Beijing will soften its restrictive pandemic policies after years of regular virus testing, travel restrictions and rolling lockdowns that have weighed on the world’s second largest economy. A former Chinese public health official also suggested that “substantial” changes to the government’s so-called zero-Covid policy could take place in the coming months, according to Reuters. Of course, it’s important to remain moderate, and we always take speculation out of China with a grain of salt. Finally, Chinese officials have not announced an official transition from their very strict Covid policy. Friday’s vaccine news is narrow: the mRNA Covid shot, manufactured by Germany-based BioNTech and US-based Pfizer (PFE), will only be available to expatriates living in China. Still, moves in certain stocks tied to China – including many owned by the club – show the market is taking the vaccine policy change well. Estee Lauder shares are up more than 7% to around $208 a share. The cosmetics giant has a big business in China and just a few days ago cut its sales forecast partly due to China’s Covid policy. Starbucks (SBUX), which sees China as its second largest market outside of the United States, rose about 7%. Strong quarterly results released Thursday night should also help the stock. Wynn Resorts (WYNN) shares are up nearly 4%. The casino operator has two important properties in the gambling center of Macao, a Chinese special administrative region. Crude oil prices rallied about 4% on Friday, likely on news out of China as a more full economic reopening of the country would boost oil demand. Price action supported oil stocks in Friday’s volatile stock market. Details on the vaccine news In a speech in China on Friday, German Chancellor Olaf Scholz announced that Beijing would make BioNTech’s Covid vaccine available to foreigners in the country. It would be the first time China has allowed a vaccine not developed domestically to be administered within its borders. BioNTech is a German company and its mRNA-based vaccine developed jointly with Pfizer is widely recognized as more effective than vaccines made by Chinese companies. It’s not immediately clear when expatriates in China might actually start getting vaccinated with the BioNTech-Pfizer Covid vaccine. While availability is limited to a specific cohort for now, Scholz has reportedly championed broader accessibility in the country. “Of course, this can only be a first step. I hope that the group of beneficiaries will soon be able to expand to a general voluntary BioNTech vaccine,” Scholz said, according to Reuters on Friday. What it means for the club Will Chinese President Xi Jinping and other Communist Party leaders heed Scholz’s request? Nobody can say for sure. For this reason, we emphasize the importance of interpreting these messages in a measured manner. But as we have already indicated, we do not believe that the Chinese government can maintain its restrictive pandemic approach forever. Its economy has shown weaker growth than in recent history, and we believe Beijing will eventually moderate its public health stance in a way that benefits the companies that operate there. Unable to predict with certainty when that would happen, we have been patient with names like Wynn Resorts – we have reduced our position to just 0.5% weighting, but still held a few stocks in hopes of a material reopening of China . Similarly, we wanted to return to Estee Lauder before there was an official announcement that China would end zero Covid. We’ve seen enough progress on this front to resume our EL position in late September, and Friday’s vaccine developments make the list. At Starbucks, the coffee chain continues to invest heavily in China and open new stores in the market, banking on its long-term profitability as its growth engine. We understand management’s overall view and were ready to invest in the company at the end of August, recognizing that we have to be patient in China. “We expect the current Covid-related uncertainty to persist and reiterate the view we shared on our third-quarter conference call and investor day that while our long-term aspirations for China remain undiminished, we believe so.” that the recovery of our business in the country will not be linear,” Starbucks interim CEO Howard Schultz said on the company’s earnings call Thursday night. A number of other club stocks such as Apple (AAPL), Qualcomm (QCOM) and Procter & Gamble (PG) have sizable Chinese companies that could benefit from an easing of Covid policy if it stimulates the economy. For example, P&G said last month that it was still being hit by lockdowns in China and a general lack of consumer confidence. “We were certainly hoping for an easing of that, but we still see a significant negative impact on consumer mobility from continued tight Covid policies,” said Andre Schulten, P&G’s chief financial officer, on the company’s first-quarter earnings call. “We feel well positioned – once we see the return of consumer mobility, we have very strong belief in our ability to grow in the market,” added the CFO. QCOM and PG shares rose on Friday. But AAPL saw no immediate benefit from the news out of China. (Apple is mired in the malaise surrounding Big Tech. The stock, including Friday, has been on a five-day losing streak since last Friday’s pop, the day after solid gains.) (Jim Cramer’s Charitable Trust is Long PG, EL, WYNN , AAPL, QCOM. 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.
Nasdaq has a “very, very strong” pipeline of Chinese companies looking to list in the coming months as the US and China appear closer to settling an audit dispute, said Bob McCooey, Nasdaq vice chairman.
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Estee Lauder (EL) and other club holdings with significant exposure to the Chinese economy rebounded on Friday after the news broke BioNTech‘s (BNTX) Covid vaccine will soon be available for foreigners living in China.