Opnion | Chinese consumers are back out in the streets

Investors have been snapping up some China reopening stock plays already on the view the China market could outperform the U.S. in the near term. In the retail sector, some of the obvious beneficiaries that have already rallied include Luckin Coffee $Luckin Coffee(LKNCY.US)$, up 60% since November, and Yum China $Yum China(YUMC.US)$ with a 30% pop. However, Wells Fargo sees many opportunities still left for investors with the consumer momentum just getting started. Of note, luxury players like Swatch $Swatch Group(SWGAY.US)$, Burberry $Burberry Group plc Sponsored ADR(BURBY.US)$,and Richemont have all pointed to strong traffic trends in January.

The firm flagged Nike $Nike(NKE.US)$, Tapestry $Tapestry(TPR.US)$, Capri Holdings $Capri Holdings(CPRI.US)$ , Farfetch $Farfetch(FTCH.US)$, and Canada Goose $Canada Goose(GOOS.US)$ as some of the apparel sellers with exposure to China ranging from 12% to 20%. Other apparel names that could see a tailwind from China due to exposure of more than 5% include Lululemon $Lululemon Athletica(LULU.US)$, Under Armour $Under Armour-A(UAA.US)$, Gap $Gale Pacific Ltd(GAP.AU)$, Kontoor Brands $Kontoor Brands(KTB.US)$, and PVH $PVH Corp(PVH.US)$.

Of course, Macau casino operator Las Vegas Sand $Las Vegas Sands(LVS.US)$has 68% revenue exposure to China and Wynn Resorts $Wynn Resorts(WYNN.US)$ has 40% exposure, but both stocks have rallied strongly and may be already pricing in a near-term boom in traffic. Within the leisure sector, Goldman Sachs thinks InterContinental Hotels Group $InterContinental Hotels(IHG.US)$ may be an under-the-radar pick with the company set to benefit from an expected surge in travel with its Holiday Inn chain throughout China. The firm noted that Chinese travelers frequently look for familiar brands when they head abroad. There is also Trip.com $Trip.com(TCOM.US)$, which has reported a huge burst of travel activity in January. The Chinese travel stock is still viewed favorably on Wall Street despite a 48% rally over the last six months .

Within the broad consumer sector, some other companies with a high mix of business from China include Domino's Pizza $Domino's Pizza(DPZ.US)$, Estee Lauder $Estee Lauder(EL.US)$, Aptiv $Aptiv PLC(APTV.US)$ and Starbucks $Starbucks(SBUX.US)$. Cowen analyst Andrew Charles thinks the China recovery represents a major catalyst for Starbucks shares this year with the 100% company-operated business model in place. China is also anticipated to give SBUX the earnings lift it needs to top its recently-issued long-term guidance.