Beijing Allows BioNTech Covid Vaccine Increases Our China-Bound Stocks
Estee Lauder ( EL ) and other club holdings with significant exposure to the Chinese economy bounced on Friday, following news that BioNTech’s ( BNTX ) Covid vaccine will soon be available to foreign residents living in China. We are cautiously optimistic about vaccine development, adding to hopes that Beijing will ease its restrictive pandemic policies after years of regular virus testing, travel restrictions and permanent quarantines that have weighed on the world’s second-largest economy. A former Chinese public health official also suggested there could be “substantial” changes to the government’s so-called zero-Covid policy in the coming months, according to Reuters. To be sure, it is important to remain measured, and we always take speculation out of China with a grain of salt. After all, Chinese officials have not announced an official transition from their very strict Covid policy. Friday’s vaccine news is narrow in scope: an mRNA Covid shot made by Germany’s BioNTech and America’s Pfizer ( PFE ) will only be available to foreigners living in China. However, movements in certain China-linked stocks – including many owned by the Club – show that the market is keeping pace with the change in vaccine policy. Shares of Estee Lauder rose more than 7% to about $208 apiece. The cosmetics giant has a big business in China and just a few days ago it lowered its sales guidance in part due to China’s Covid policy. Shares of Starbucks ( SBUX ), which considers China its second-biggest market outside the U.S., jumped about 7%. Strong quarterly results released Thursday night are likely to help stocks as well. Shares of Wynn Resorts ( WYNN ) rose nearly 4%. The casino operator has two major properties in the gaming hub of Macau, a special administrative region of China. Crude oil prices jumped about 4 percent on Friday, likely on news from China as a fuller economic opening in the country would boost oil demand. The price movement provided some support for oil stocks in a volatile stock market on Friday. Vaccine News Details Speaking in China on Friday, German Chancellor Olaf Scholz announced that Beijing will make BioNTech’s Covid vaccine available to foreigners in the country. It would be the first time China has allowed a vaccine not developed in the country to be used within its borders. BioNTech is a German company, and its mRNA-based vaccine – co-developed with Pfizer – is generally considered more effective than vaccines made by Chinese firms. It was not immediately clear when expats in China could actually start receiving the BioNTech-Pfizer Covid vaccine. Although its availability is limited to a certain group for now, Scholz reportedly pushed for wider availability in the country. “Of course, this can only be the first step. I hope that the circle of eligible people can soon be expanded to the general free ability of the BioNTech vaccine,” Scholz said on Friday, according to Reuters. What it means for the Club Will Chinese President Xi Jinping and other Communist Party leaders heed Scholz’s plea? No one can say for sure. That is why we emphasize the importance of interpreting this news in a measured way. But as we’ve suggested before, we don’t think the Chinese government can maintain its restrictive approach to the pandemic forever. Its economy has shown weaker growth than recent history, and we think Beijing will eventually soften its stance on public health in a way that benefits companies that do business there. Since we cannot predict with certainty when this will happen, we have been patient with names such as Wynn Resorts – reducing our position to just 0.5% weighting, but still holding some shares in the hope that China will materially reopen . Similarly, we wanted to return to Estee Lauder before the official announcement that China was going zero Covid. We’ve seen enough progress on that front to restart our EL position at the end of September, with vaccine development joining the list on Friday. At Starbucks, the coffee chain continues to invest heavily in China and open new stores in the market, betting on its long-term viability as a growth driver. We understand management’s big view and were willing to take a stake in the company at the end of August with the recognition that we need to be patient in China. “We expect the current uncertainty related to Covid to continue and reiterate the view we shared on our Q3 call and our Investor Day that while our long-term aspirations for China remain undiminished, we expect the recovery of our business in the country to be non-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 significant businesses in China that will benefit from the relaxation of the Covid policy to the extent that it boosts the economy. For example, P&G said last month that it continues to be affected by the blockade in China and a general lack of consumer confidence. “We certainly hoped that would ease, but we still see a significant negative impact on consumer mobility due to the continued strict Covid policy,” P&G chief financial officer Andre Schulten said in the company’s first-quarter earnings report. “We feel well positioned – when we see the return of consumer mobility, we feel very strongly about our ability to grow in the market,” the CFO added. Shares of QCOM and PG rose on Friday. But AAPL saw no immediate benefit from the China news. (Apple is mired in trouble over Big Tech. The stock, including Friday, has been on a five-day losing streak since last Friday, a day after solid earnings.) (Jim Cramer’s charitable trust is long PG, EL, WYNN , AAPL, QCOM (See here for a complete list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim executes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust’s portfolio. If Jim was talking about stocks on CNBC TV, he waits 72 hours after the trade warning is issued before he executes the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CONTINUED, BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NOT GUARANTEED NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
Nasdaq has a “very, very strong” pipeline of Chinese companies seeking to list in the coming months as the U.S. and China appear closer to resolving an audit dispute, said Bob McCooey, Nasdaq vice chairman.
VCG | Visual China Group | Getty Images
Estee Lauder (EL) and other club holdings with significant exposure to the Chinese economy bounced on Friday after news that BioNTech‘s (BNTX) Covid vaccine will soon be available to foreign residents living in China.
#Beijing #BioNTech #Covid #Vaccine #Increases #ChinaBound #Stocks
