5 Stocks to Take Advantage of China’s Economic Reopening
Nearly three years after China shut down their economy, the world is still not over it. While many countries around the world have evolved and are ever-changing, there are several still operating under restrictions.
China’s restrictions have loosened and tightened over the years as varying waves of restrictions swept across the country. Now, however, the country is finally looking ahead to the future to fully reopen the country’s economy.
When China eventually fully reopens, several companies should benefit greatly. Investors should consider the following stocks for a Chinese turnaround.
Based in Tokyo, Yoshitsu Co., Ltd is an international supplier of health & beauty supplies, general home goods, as well as food. The company operates physical retail outlets around Tokyo and franchises international stores in major cities in the U.S., Canada, and the U.K. They also operate many online stores spread across Japanese, Chinese and Korean websites.
China is a major area of focus for Yoshitsu; the company generated over 75% of its revenue from China in FY2021. With the country emerging into a new era and its citizens beginning to once again purchase high-quality health & beauty products, Yoshitsu is targeting China for major expansion plans.
In addition to opening additional retail outlets in major Chinese cities, the company is investing significantly to improve order fulfillment in the country. Yoshitsu’s most important investment will be its forthcoming Hong Kong distribution center, which will serve to ensure that its Chinese outlets are well-stocked and popular products remain in inventory.
In addition to its high-quality products, Yoshitsu brings with it the strong business culture that has made Japan a global powerhouse and is quickly becoming a trusted supplier. Also aiding Yoshitsu is the strong U.S. dollar, given its negative impact on U.S. exporters. With U.S. products costing more due to the strength of the currency, Yoshitsu can step in and offer its products at attractive prices.
With it being the smallest company on this list, Yoshitsu is perhaps the best opportunity. The company’s focus on a rapidly expanding Chinese market for high-quality health & beauty products should see its revenue and income grow at a higher clip than much larger companies.
Shares of Yoshitsu closed trading today at $1.34 per share, up +3.88% on the day.
One of the largest companies not only in China but the world in general, Alibaba, is commonly known as the “Amazon of China” thanks to it being the leading online retailer in the country. The company even has a cloud computing division akin to Amazon’s AWS.
Unfortunately, over the past few years there’s been a major hamper on virtually all of Alibaba’s operations. Supply chain issues hampered the availability of many products and increased prices, while the spending power of Chinese citizens had been severely impacted.
As China begins to reopen their economy, Alibaba stands to benefit greatly, perhaps more than any other company. The country’s economy should return to its trajectory of eventually becoming the largest in the world, greatly expanding Alibaba’s revenue opportunities.
Shares of Alibaba closed Monday at $63.58 per share, down -0.25% on the day.
In recent years, Chinese citizens have begun to accumulate enough wealth to be able to afford high-end imports, including designer clothing. One of China’s preferred foreign clothing brands is Canada Goose, which makes top-of-the-line winter clothing. While the company operates in many countries around the world, its largest physical retail presence is in China, where it has 14 stores.
It is this strong presence in China that has caused the company to suffer since closures within their economy. On its last earnings call, the company detailed how four of its Chinese stores were still closed while the other ten were operating under certain restrictions that have reduced foot traffic. Supply chain issues have also hampered online sales in China, further reducing sales. These issues in China were the reason given that the Asia Pacific region was the only region that saw revenues decline year over year.
As we enter the colder months and China eases restrictions, Canada Goose management expects to see a dramatic uptick in revenue from the country. Once the company is able to report these strong results, the stock should be much more attractive to investors.
Shares of Canada Goose closed Monday’s trading session at $22.29 per share, down -5.91% on the day.
Despite tea being the more popular choice in China, coffee purveyor Starbucks has a major presence in the country. Spread across over 200 cities, the company has 5,400 locations in China. Over the last few years, restrictions have shuttered many of these stores, leading to double-digit reductions in revenue.
The company is expected to benefit greatly from China emerging into its new era. In addition to reopening closed stores and removing restrictions at others, Starbucks should benefit from Chinese citizens returning to grow its disposable income, which will increase its customer base in the country. Once restrictions are firmly in the rearview mirror, expect to see Starbucks return to opening more stores across China.
Shares of Starbucks last traded at $86.59 per share, down -0.59% on the day.
The parent company of several luxury fashion brands, including Kate Spade, Coach, and Stuart Weitzman, Tapestry suffered more than most companies from China shutting down. Restrictions shuttered nearly half of the stores in the country while also drastically reducing the disposable income of its citizenry, cutting many off from being able to afford Tapestry’s brands.
Coach, in particular, is a popular brand in China due to its affordability. Tapestry believes that Coach sales in China will ramp back up to previous levels during the economy reopening, while additional stores and the growing Chinese middle class should lead them to new heights in the near future.
On a macro level, China is expected to greatly increase its consumption of luxury goods over the coming years, from 33% of global luxury sales in 2019 to 46% in 2025. Tapestry and its mid-range luxury offerings stand to benefit greatly from China’s increasing appetite for the finer things in life.
Shares of Tapestry are currently trading at $31.68 per share, down -0.85% on the day.
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