According to Wall Street analysts, Mastercard Inc and Visa Inc will rely on China reopening to boost travel spending as the pace of growth in other parts of the world slows from a post-pandemic boom.

Executives from payment companies said on Thursday that there is still room for travel recovery in China, which reopened its borders earlier this month after abandoning its stringent COVID-19 control measures.

Consumers have begun to cut back on discretionary spending after splurging on vacations for the majority of last year as the Federal Reserve aggressively tightened monetary policy, raising fears of a recession and prompting massive layoffs.

Analysts predict that as payment processors enter 2023, they will face difficult comparisons to last year’s strong growth.

“The impact of the rebound in cross-border transactions is likely to diminish going forward, and this recovery could be at risk in the near term if the economy takes a negative turn,” Morningstar analyst Brett Horn said.

“However, the reopening of China should act as a modest boost.”

After both companies reported quarterly profits that exceeded Wall Street estimates on Thursday, at least seven brokerages raised their price targets (PTs) for Mastercard and six raised their PTs for Visa.

Visa shares rose nearly 3% on Friday, while Mastercard rose nearly 1% in choppy trading.

“Consumer spending has remained surprisingly resilient, but reopening has not been worked through in earnest – especially in Asia where there is pent-up travel demand post China reopening,” said Macquarie Group analyst Paul Golding.

Both Visa and Mastercard warned of a slowing travel recovery, but credit card lender American Express Co dismissed those concerns on Friday, pointing out that the company’s high-income customers are still doing well.

(Adapted from Latestly.com)