Trip.com Group Ltd TCOM shares are trading higher by 5.4% to $51.74 during Tuesday’s session after the China Central Bank announced a new stimulus package.
What Happened: The PBoC announced a 50-basis-point cut to the reserve requirement ratio, bringing it down to 9.5% for commercial banks, alongside a reduction in the seven-day and 14-day repo rates. These measures will pump approximately 1 trillion yuan ($140 billion) into the banking system, increasing lending capacity and making borrowing more affordable for businesses and consumers alike.
For Trip.com, these developments come as a timely boost. The company, which provides services ranging from hotel reservations and transportation ticketing to packaged tours and corporate travel management, is highly sensitive to macroeconomic trends in China.
The aggressive monetary easing is expected to alleviate pressure on China’s economy, which has been grappling with sluggish consumer demand, a struggling property sector, and global economic headwinds. With more liquidity in the market and reduced borrowing costs, both individual and corporate spending on travel are likely to see a recovery.
What Else: Additionally, the reduction in mortgage rates and other measures to support the housing market could lead to increased discretionary income for Chinese consumers. Historically, an upturn in disposable income has correlated with higher spending on leisure activities, including travel, benefitting companies like Trip.com.
The firm stands to gain from a revitalized domestic travel market, particularly as lockdowns and strict travel restrictions have subsided.
Another factor bolstering investor confidence in Trip.com is its exposure to the international travel market. As global tourism resumes following the pandemic, Chinese consumers are expected to resume outbound travel in significant numbers, a key revenue driver for Trip.com.
The PBoC's moves signal broader economic stability, which could ease concerns about a prolonged downturn affecting consumer confidence and travel spending.
Read Also: Fed ‘Catching Up’ With 50-Point Rate Cut: Fund Managers Expect Gains In Emerging Markets, Small Caps
How To Buy TCOM Stock
Besides going to a brokerage platform to purchase a share – or fractional share – of stock, you can also gain access to shares either by buying an exchange traded fund (ETF) that holds the stock itself, or by allocating yourself to a strategy in your 401(k) that would seek to acquire shares in a mutual fund or other instrument.
For example, in Trip.com Group’s case, it is in the Consumer Discretionary sector. An ETF will likely hold shares in many liquid and large companies that help track that sector, allowing an investor to gain exposure to the trends within that segment.
According to data from Benzinga Pro, TCOM has a 52-week high of $58.00 and a 52-week low of $31.55.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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