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How investors can navigate the China A-Shares market

Investors shouldn’t allow ignorance of China’s onshore equity market to obscure the opportunities it presents.


China, after all, is the world’s largest economy in purchasing power parity terms. In nominal GDP terms, it’s the second largest after the United States. Moreover, its deep and liquid stock market is also the world’s second largest, with a market capitalisation of $8.5 trillion.

Yet A-shares account for just 3.7% of the MSCI World Index. By contrast, US stocks represent more than 50% of the global equity benchmark.

The reasons for this are well known. Until recently China’s stock market had largely been inaccessible to international investors. But things are changing fast.

MSCI started to include A-shares in its widely tracked indices last year. At present they have a 0.7% weighting in the MSCI Emerging Markets Index. Incremental increases mean that they will represent about 3.5% in little over a year and within five years are forecast by UBS to account for about 20%. Global index provider FTSE Russell is following a similar path.

Now this weight in global benchmarks is increasing and the direction of travel is clear, it has become an active decision for investors not to hold A-shares for the first time.

There are compelling reasons why global investors can’t afford to ignore A-shares anymore. Many may be investing in China already through the more accessible H-share market, as characterised by the MSCI China Index. Mostly these stocks are listed on the Hong Kong Stock Exchange.

But the A-share market offers something different. It comprises approximately 3,500 stocks – offering a far wider choice than the 700 or so Chinese companies listed offshore.

Watch the below video of Aberdeen Standard Investment’s expert on China, Ross McSkimming, to understand why and how a trusted and experienced partner can help you benefit from the China A shares market.