The Long-Term View
Negotiating China's Equity Markets

Greg Kuhnert

Investor behaviour:

Foreign and domestic investors behave very differently on the Chinese stock markets.

{{ letter.replace(' ', ' ') }}

{{ letter.replace(' ', ' ') }}

{{ letter.replace(' ', ' ') }}

{{ letter.replace(' ', ' ') }}

The rebalancing of China’s economy to a new model that is less dependent on savings, capital investment and exports and the significant structural shifts taking place in China’s onshore stock markets seem to present an exciting new long-term opportunity.

China’s stock markets have significant growth potential. We believe this expansion will be propelled by domestic investors who will allocate a greater proportion of their assets to equities over time. Foreign investors will also have their role to play in expanding China’s equity markets as Beijing allows greater international participation in the Shanghai and Shenzhen stock exchanges. As more overseas investors seek to take advantage of this new market, Chinese shares are likely to become a more important part of global investors’ portfolios and encourage the leading index providers to include domestically listed A-shares in their global indices.

But taking advantage of this opportunity is challenging. Today, domestic retail investors dominate China’s stock markets, which drives substantial volatility as they tend to follow less disciplined investment processes and react more strongly to market sentiment. But these market conditions should not be a reason for long-term investors to shun the opportunities presented by China’s economic rebalancing.

By using a disciplined, bottom-up approach that ignores market momentum, it is possible to identify compelling investment cases for individual stocks, which may provide a reliable exposure to the Chinese growth story over the long term.

Chinese shares are likely to become a more important part of global investors’ portfolios and encourage the leading index providers to include domestically listed A-shares in their global indices.

Past performance is not a guide to the future and investments carry a risk of capital loss. Investment in mainland China may involve a higher degree of risk of financial loss when compared to countries generally regarded as having more developed legal, political, economic and/or other systems.

The significant structural shifts taking place in China’s onshore stock markets seem to present an exciting new long-term opportunity.

{{ letter.replace(' ', ' ') }}

{{ letter.replace(' ', ' ') }}

{{ letter.replace(' ', ' ') }}

{{ letter.replace(' ', ' ') }}

{{ letter.replace(' ', ' ') }}

3.2

Three In One: Unlocking China’s Bond Markets

Mike Hugman and Wilfred Wee

Next Article