What happened
Nike (NKE 0.95%) stock was gaining today, once again on signs that China is loosening its zero-COVID policy, setting up the sneaker giant for a comeback in a key market.
As of 12:44 p.m. ET, the stock was up 5.7% on the news.
So what
After a week of rumors, Chinese officials finally made an announcement on COVID rules, shortening the mandatory quarantine period for inbound visitors and for close contacts, but it kept much of the zero-COVID restrictions. Officials said that the country must "firmly stick to the dynamic zero-Covid policy," according to The Wall Street Journal.
Nonetheless, the news was greeted warmly by investors who sent stocks in China and Hong Kong higher with Hong Kong's Hang Seng index finishing the day up 7.7%.
Consumer stocks that have exposure to China also reacted well to the news, and China has been a particular pain point for Nike, which invested heavily in China as one of its biggest growth markets.
Currency-neutral sales fell 13% in China in its most recent quarter, and operating profit was down 23%. Though Nike stock is down nearly 50% from its peak over the last year, sales growth remains strong outside of China. On the other hand, bloated inventory levels have weighed on profits as the company has been forced into excess markdowns.
Now what
What's next for China remains to be seen, but the reaction is a good sign for Nike stock as it shows that it's primed to surge when the Chinese economy does reopen, which will happen eventually.
While Nike profits are down at the moment, the stock looks well priced as profits should bounce back. Additionally, rival Adidas' troubles with Kanye West could set up an opportunity for Nike to gain market share.
