China has gone all out to stimulate the domestic economy and a slew of measures the government and the central bank proposed has kickstarted a strong rally in the domestic stock market. CNBC Mad Money host Jim Cramer weighed in on the development and recommended a few stocks that could be potential beneficiaries.
What Happened: “The Chinese are, once again, stimulating and everyone’s back,” said Cramer in a post on X, formerly Twitter. He also recommended Apple, Inc. (NASDAQ:AAPL), Starbucks Corp. (NASDAQ:SBUX) and Alibaba Group Holding Limited (NYSE:BABA) for those looking for stimulus plays.
In a separate post, Cramer said he would love for China to set up a stock stabilization fund and use it to cushion any downside in stocks.
On Monday, the Chinese Shanghai Composite Index settled 8.06% higher 3,336.50 after Caixin manufacturing and services sector purchasing managers’ indices disappointed to the downside. The index has gained nearly 22% since Sept. 20 and is up about a little over 12% for the year.
The People’s Bank of China announced last week it will in the near future cut the reserve requirement ratio, which is the amount of cash banks must hold as reserves, by 50 basis points freeing up about 1 trillion yuan ($142 billion) for new lending, Reuters reported.
The central bank hinted at the possibility of reducing it by an incremental 0.25-0.50% points. The PBoC also said it would lower the seven-day repo rate by 0.2 points, the interest rate on a medium-term lending facility by about 30 basis points and loan prime rates by 20-25 basis points.
See Also: Best Chinese Stocks
Why It’s Important: For Apple, China is a key market both from the perspective of supply and demand. Cupertino counts China as its major manufacturing base despite its efforts to diversify its production base. China is also a key market for the company’s consumer electronics products, specifically its iPhone, and its services business. Of late, Apple has been stymied by domestic competition that is flooding the market with cheaper smartphones. Huawei has re-emerged as a key rival for Apple in the Chinese smartphone market.
Coffee chain retailer Starbucks has a strong presence in China. The weakening of economic fundamentals in China has impacted the company’s sales in recent quarters. In the June quarter, Starbucks’ same-store sales in China fell 14% compared to a more modest 2% drop in the U.S.
Alibaba’s fortunes are closely tied to the Chinese economy as it generates the bulk of its e-commerce sales from China.
Apart from Cramer’s recommendation, a Chinese economic revival may also bode well for commodity and energy stocks and those multinational corporations have a big presence in the country such as Tesla, Inc. (NASDAQ:TSLA).
The iShares MSCI China ETF (NYSE:MCHI) rallied 3.35% to $52.70 in premarket trading on Monday, according to Benzinga Pro data.
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