Friday, 8 November 2019

China's mainland stock market has been performing bounteously


China's economic growth has slowed to the slowest pace in nearly 3 decades this year. This is a result of a shift to a new economy and a intensive trade war with the USA. There is also continued unrest in Hong Kong.

However, China's mainland stock market has outpaced the others in the world. The mainland stock market is made up of mainly domestic-oriented companies. The stock market is having a very good year. It has even been the best performing major stock index in the world.

Buying stocks directly in a foreign market like India or China is possible, but it may be harder than purchasing domestic shares. Investors can purchase American Depositary Receipts on U.S. exchanges, which are certificates that represent shares in a foreign company. China A-shares are now open to foreign investors.

China has A shares and B shares.

A shares, also known as domestic shares, are shares that are in Renminbi and traded in the Shanghai and Shenzhen stock exchanges, as well as the National Equities Exchange and Quotations.

B shares (officially Domestically Listed Foreign Investment Shares) on the Shanghai and Shenzhen stock exchanges refers to those that are traded in foreign currencies.

China's onshore stocks, called A shares, have delivered more than 37% total return for investors this year, based on the FTSE A share 200 index.

Some interesting figures:
  • China's benchmark Shanghai Composite Index has risen 19% year to date
  • Japan's Nikkei has gained 18%
  • MSCI's index of Asian shares, excluding Japan, has risen 13%
  • Hong Kong's Hang Seng is up 8%
  • The S&P 500 has gained 23%
China's A shares received a big boost from the country's deregulation and market liberalization initiatives, the Chinese government's stimulus measures and particularly from increased weighting in MSCI's emerging markets index.

China has the second-largest stock market in the world. This market is growing fast. However, mainland Chinese stocks are still owned only by few outside China.

China's A shares may improve even more. Inclusion in MSCI's emerging markets index has been a major driver of inflows and more stocks are set to be added. MSCI wants to increase the A shares' weight in the EM index. MSCI inclusion is seen as a stamp of approval from the investment community that equities are safe.



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