Investing in China – Be Selective and Stick With Quality
Investors looking to gain exposure to EM cannot overlook China with MSCI China Index outperforming MSCI EM ex China Index dramatically. However, the country has unique challenges as well – a way forward to confronting these challenges is to be selective and to stick with quality names.
China now makes up over 40% of MSCI Emerging Markets Index and getting the country right is crucial to investing successfully in emerging markets (EM). However, owing to heightened tensions between the United States (US) and China in recent years over trade, technology and geopolitics, many investors have concerns about being exposed to China.
It should be noted that compared with the total return of the MSCI EM ex China Index, MSCI China Index has outperformed dramatically (Figure 1). From 1 January 2017 through 29 May 2020 MSCI China was up 46.6% – a whopping 41.9 percentage points ahead of MSCI EM ex China (cumulative).