Investors Want To Invest In China, Just Without Owning Chinese Stocks

Investors Want To Invest In China, Just Without Owning Chinese Stocks
Andrew Rummer

over 2 years ago1 min

Despite China’s recent crackdowns on high-flying companies as part of its “common prosperity” push, investors still appear keen to invest in the world’s second-largest economy – just without owning Chinese shares. 

The chart above shows how the MSCI China Index (in pink) has tumbled since February as authorities took steps to rein in some of its most successful firms, including hitting Alibaba with a $2.8 billion antitrust fine and banning Didi’s ride hailing app from Chinese app stores.

But while Chinese stocks have suffered, companies in the West that get a large chunk of revenue from China have held up pretty well. The MSCI World With China Exposure Index, which includes stocks like chipmaker Texas Instruments and mining giant BHP, is up 10% this year (as shown in blue on the chart) while the MSCI China has dropped 13%. 

Over the longer term, the chart shows that these two indexes have tended to move pretty much hand in hand. So brave investors willing to bet the “common prosperity” drive will eventually end could potentially pick up a bargain buying the MSCI China. 

Popular exchange-traded funds (ETF) that track the index include the iShares MSCI China ETF, with the ticker MCHI in the US and ICHN in Europe. 

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