Benefits beyond returns
Access to onshore markets gives investors a wider choice of companies in fast-g rowing ‘new economy’ sectors, like consumer discretionary, IT, healthcare, and insurance, thus offering a wider set of growth opportunities than currently available offshore, like in Hong Kong and US equity markets, where some Chinese companies are listed.
But beyond returns and access, onshore China equities offer valuable diversification benefits to investors, since Chinese equity markets have low correlation to global markets, because they are more focused on growth opportunities in China, where growth trends differ markedly.
And by historical standards, China equity valuations on A-share markets look attractive. Trading at 10.9x P/E at the end of September 2018, valuations are low, particularly when considering fundamentals for ‘new economy’ sectors look attractive.