China Loosens COVID Rules, Sending Travel, Leisure Stocks Higher: What Investors Need To Know

Chinese travel and entertainment stocks are on the rise on Tuesday on reports of loosening COVID-19 restrictions in China.

What Happened? On Tuesday, China’s National Health Commission said it would ease strict quarantine requirements for international travelers, the Wall Street Journal reported.

China has reduced the total quarantine period for all travelers entering the country and anyone who has come in close contact with COVID-19 patients from 21 days to 10 days.

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Why It's Important: While most of the rest of the world has taken on COVID-19 with a combination of vaccinations and herd immunity, China's extremely strict zero-COVID policy has been a drag on its economy, particularly the leisure and travel industries.

The latest news could be a sign that China may be softening its zero-tolerance policies in the near future.

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Several U.S.-listed Chinese travel, education and leisure stocks made big moves in response to the news on Tuesday morning:

• Tuniu Corp TOUR was up 36.7%.
• Ambow Education Holding Ltd AMBO was up 33.5%.
• Trip.com Group Ltd TCOM was up 16.7%.
• Tarena International Inc TEDU was up 10%.
• Melco Resorts & Entertainment Ltd MLCO was up 8.6%.

Despite the bullish news on COVID-19 restrictions, China Beige Book CEO Leland Miller said Tuesday that lockdowns have had a serious impact on China's economy in the second quarter.

"Intensive lockdowns wreaked havoc on domestic demand, resulting in significant Q2 disinflation," Miller said.

Benzinga's Take: U.S. investors betting on the high-growth Chinese economy as a long-term investment have beenundermined by China's own government in the last year. Whether it be crackdowns on Chinese education and tech stocks or China's seemingly stubborn approach to COVID-19, China has stifled its own growth and soured its reputation among global investors.

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