MSCI China Indices - Methodology for Tracking Stock Movements

1
Getting China Equity exposure with MSCI China and
other indices
2
Brief introduction to Chinese equities

• Historically, investing in Chinese equities has
  been a complex undertaking, off-limits to many
  foreign investors. But the market is gradually
  opening up.
• There are several share classes of Chinese
  equities. Companies incorporated in the Peoples
  Republic of China can issue A-shares, B-shares
  and H-shares.
• The main differences between these share classes
  are the listing location and the currency in
  which the shares are traded.

3
Brief introduction to Chinese equities

• Other types of Chinese stocks exist as well,
  representing shares of Chinese companies
  incorporated and exchanged outside of China.
• Until recently, the onshore Chinese market,
  A-shares and B-shares, has been mostly off-limits
  to foreign investors.
• However, various programmes introduced by the
  government over recent years offered foreign
  investors an opportunity to participate in the
  onshore market.

4
MSCI China Indices

• MSCI indices are widely used by the global
  investment community. Driven by the institutional
  demand for the asset class, MSCI has been
  steadily increasing the representation of China
  A-shares in its global indices.
• Since MSCIs initial inclusion announcement in
  2018, Chinese onshore equities have experienced
  billions of dollars of foreign capital inflows.

5
MSCI China Indices

• MSCI has several indices that can be used as a
  proxy for Chinese equity exposure and
  performance. The MSCI China Index and the MSCI
  China All Shares Index are the most common. The
  major difference between the two is the extent of
  inclusion of A-shares in the investment universe.

6
MSCI China Indices

• While the MSCI China Index has a cap on A-shares
  inclusion, the MSCI China All Shares does not.
  While this might seem like a minor difference, it
  has a substantial impact on the composition. For
  example, Consumer Discretionary, Communication
  Services and Financials make up 64.32 of the
  MSCI China Index.
• MSCI China All Shares Index offers more
  diversified exposure, with the top 3 sectors
  representing 48.52 of the index, followed by
  Consumer Staples and Technology both having over
  9 allocation.

7
Getting exposure to Chinese equities

• For investors looking to allocate capital to
  Chinese equities, there are two simple and
  effective options. One is through an ETF tracking
  one of the major indices.
• Another option is to use an actively managed
  mutual fund. Active management could be
  particularly effective in a market like China. 

8
Read more at
www.AsiaFundManagers.com
Find us on Social!