Chinese equities have suffered year-to-date, dragged lower by escalating trade tensions, a weaker yuan and the effects of deleveraging policies. A lot’s been written too about the expectation that growth will slow to around 6% next year.
Seen differently though, that sell-off is quite possibly excessive given domestic consumption is 62% of growth. And that growth is twice as fast as the US (the world’s largest economy) and three times faster than the rest of the developed world! Put simply, China is too big to ignore or just bucket together with other emerging markets.
Lyxor is changing its Emerging Markets ETFs – find out how
In my view, the reasons not to invest in China are all old news and, more importantly, all priced in. Sentiment has started to turn already, with record aggregated one-month inflows into on and offshore China indices in October. Valuations are however still hovering near rock bottom, meaning there’s still time to act and gain cheap exposure to real tech disruptors like Tencent and Alibaba.
So how should you invest? Over the years, there’ve been all sorts of ways to invest in China. Few active managers have shown they can deliver alpha consistently but few indices have really married up to the myriad segments of the Chinese market – except that is for the MSCI China.
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