There are many explanations for this dramatic underperformance, some more credible than others. In our view, by trying to sort the fact from the fiction, investors stand to get a better handle on whether the falls are truly justified by the fundamentals, or whether other short-term factors may have distorted the picture, potentially highlighting rare and attractive opportunities for investors.
China is not without its problems but given the sheer scale of opportunities, warrants far more than peripheral market status for equity investors. Investors should look through the lingering anti-China haze and instead focus on the powerful longer-term growth story.
While global stock markets have performed surprisingly strongly in 2023 – flying in the face of geopolitical worries and elevated interest rates – China has been a notable exception. The MSCI AC World index climbed 18% in US dollar terms over the first 11 months of 2023 (to the end of November). Meanwhile, the broad-based MSCI China A index has fallen by 9% over the same period.
