Why is an All China approach strategic?
China’s onshore markets have opened up and the distinction between onshore and offshore markets is becoming increasingly irrelevant. Investors can look at China investing with an All-China equity approach and allocate to whichever market offers the best opportunities.
The benefits of an All-China equity approach are numerous but three, in particular, stand out because investors can:
1. Access a wider opportunity set
3,560 domestic companies
1,322 offshore companies (listed outside of China, mainly in Hong Kong)1
2. Combine high-growth sectors in one portfolio
onshore markets: more companies in fast-growing healthcare and consumer sectors,
offshore markets: big selection of innovative tech and services companies;
3. Diversify risk
China A-share (i.e. domestic) markets have low correlation to other global markets2. By having them combined in your China portfolio, you will be less affected by changes overseas.
It's a matter of time
Says Bin Shi, lead manager for China equities before China equities becomes a separate asset class like US or Japan equities.
Investors are still underweight China
China is driving the world economy - contributing 33% of global growth in 20193, but is only 3.7%4 of the MSCI World Index. That means the world remains underinvested in China.
The challenge for investors then is how to capture the growth and, given China's weight in the world economy, a standalone allocation using an All-China Equity approach could make sense.
That's because an All-China Equity approach combines on- and off-shore opportunities, offers investors a range of benefits, and looks likely to be the best way of capturing China's ongoing story. And that's something investors should definitely consider when planning a China strategy.
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