China's Policy Shift Boosts Stocks Exposed to the Country

On Monday, U.S. stocks with significant ties to China experienced a remarkable rally across a broad range of sectors, from materials to consumer sectors and Chinese ADRs. This surge came in response to statements from China's top leaders signaling a shift towards more coordinated monetary and fiscal policies. The KraneShares CSI China Internet ETF rose by 11%, while major internet companies like Alibaba, Baidu, PDD, JD.com, NetEase, Trip.com, KE Holdings, and Bilibili saw significant gains in New York.

The Hang Seng Tech Index rebounded from an initial drop to close up by 4.5%, while the broader Hang Seng Index rose by 2.8%. This shift in China's economic strategy incorporates adopting a "moderate easing" monetary policy for the first time in nearly 14 years. Additionally, the Politburo committed to stabilizing the real estate and stock markets and revitalizing domestic demand.

This policy change follows recent data showing that China's Consumer Price Index increased more slowly than expected, with a mere 0.2% year-on-year rise in November. Market participants are now eagerly awaiting the results of China's Central Economic Work Conference, scheduled for this weekend, which could unveil further economic directives.

Consumer brands operating in China also benefitted from the optimistic outlook; Estee Lauder, Nike, Las Vegas Sands, Melco, Wynn Resorts, Canada Goose, Yum China, and Starbucks all reported profits. Mining companies reacted positively to the news on Monday morning; Freeport-McMoRan (NYSE:FCX) rose by 5.6%, Southern Copper by 7%, Taseko Mines by 8.7%, ERO Copper by 7.9%, and Teck Resources by 5.9%.

Chemical stocks also participated in the rally; Celanese led with a 6.5% increase, followed by Albemarle with a 6.2% gain, FMC up by 5.1%, and Mosaic recovering by 4.5%. These moves underscore the market's broad reaction to China's economic policy announcements and their potential impact on companies with business interests in the region.