China is easing international travel restrictions, boosting shares of 2 Club stocks

Published Tue, Jun 28 202212:58 PM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

China is relaxing its Covid restrictions for international travelers , providing a lift Tuesday to a couple Club holdings with exposure to the world's second-largest economy. Companies in the travel and leisure industry are primarily the ones benefiting, given the specifics of the news: International travelers now will need to quarantine at a centralized facility for seven days instead of two weeks, followed by three additional days of at-home monitoring instead of one week. Additionally, people who are close contacts of Covid-infected individuals now need to isolate for a week in a centralized quarantine facility and then spend three days monitoring at home. The old isolation requirements typically were for at least 14 days. Why it matters Last week, we did a deep dive into how the stocks in Jim Cramer's Charitable Trust , which is the portfolio we use for the Club, stand to benefit if the three large overhangs on the market this year were resolved. Tuesday's action in China-related stocks is offering optimism on one of those overhangs: Beijing's insistence on pursuing a so-called "zero Covid" policy, which has caused major disruptions to everyday life of citizens and, by extension, business operations. The other two major negative factors are the Federal Reserve's aggressive monetary tightening in an attempt to stamp out inflation but possibly causing a recession, and Russia's unprovoked attack on Ukraine. Caveats needed To be sure, this is only an incremental step toward the Chinese government adopting a more sensible, less-restrictive Covid policy. We also have no idea how China will react to a potential uptick in coronavirus cases that may follow these quarantine relaxations for overseas travelers. For now, investors are responding favorably Tuesday to Beijing's decision to crack open the door to a more business-friendly Covid policy — but the government could shut it down as easily as it was opened. With those caveats in mind, here's how our leisure stocks with China exposure are moving Tuesday: The casino and resort operator is among the best-performing stocks in the S & P 500 on Tuesday. Investors want to see anything that makes it easier to travel to the special administrative region of Macau, where Wynn has two hotel and casino resorts that have been severely hurt by Covid restrictions. Tuesday's quarantine easing checks that box. Disney is part-owner of the Shanghai Disneyland theme park, which is now set to restart operations Thursday. It's largely been shuttered since March, when China started to implement strict lockdowns in response to a wave of Covid cases. News of the park's reopening, combined with the international travel restrictions, are welcome developments for Disney shareholders. Bottom line As we noted above, making it easier to travel into China is welcome news for the travel and leisure industry, boosting Wynn and Disney. Some of our other stocks that would benefit from a complete reopening of the Chinese economy — namely semiconductor firms like Nvidia (NVDA) and Advanced Micro Devices (AMD) — aren't really impacted by Tuesday's quarantine changes. Trying to predict exactly what the Chinese government will do next on Covid policy is an impossible task, but some investors are certainly glad to see the door cracked open. (Jim Cramer's Charitable Trust is long WYNN, DIS, NVDA and AMD. 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 before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

A pedestrian with an umbrella walks in front of the Wynn Palace casino resort, operated by Wynn Resorts Ltd., in Macau, China, Jan. 31, 2018.

Billy H.C. Kwok | Bloomberg | Getty Images