China’s markets are opening to the world—but be aware of the potential for unintended consequences. As more money flows into domestic Chinese stocks from abroad, more money is also flowing out of China, which may trigger volatility in regional markets.
President Trump’s plans for tariffs on about $60 billion of Chinese imports have rattled equity markets. Investors should begin to study which types of industries, countries and companies could win or lose if an all-out trade war erupts.
As the Chinese New Year approaches, investors will welcome the year of China A-shares, soon to be included in the MSCI emerging-market (EM) benchmarks. But put careful consideration into determining which funds are actually ready to join the festivities.
China is dropping its focus on “dirty” industrial growth, while making a massive shift toward renewable energy and a less resource-intensive path to economic success. This reorientation could open up substantial opportunities for equity investors.
MSCI has announced that China A-shares will be included in its emerging-market (EM) index next year, as we anticipated. Now, global equity investors need to consider how to access the vast universe of stocks traded onshore in China.
China A-shares could shortly be included in a key international benchmark for the first time—in a way that highlights smarter efforts by the West to help China integrate fully into global markets.