Global institutional investors in Chinese equities, either using fundamental or quantitative approaches, may find potential opportunities in sector rotation and in factors’ deviations from their long-term patterns.

Although Chinese equities generally performed poorly from 2021 through 2023, certain dedicated China funds earned double-digit annualized returns. We propose a three-layer framework to help demystify the drivers of excess returns in the China market. 

Since early January, several forces, including leverage and crowded longs in small- and micro-cap stocks, have contributed to a mini liquidity crisis among some quantitative mutual and hedge funds in China.

Northbound outflows set a record in the last five months of 2023, primarily exiting the financial, consumer-staples, industrial, materials and information-technology sectors.  

The China A shares market has grown rapidly, along with the number of small-cap stocks. We compare a market-cap-coverage approach to index construction vs. a fixed-number approach and find the former more consistently captured small-size exposure. 

For markets, Russia’s build-up of military forces along its border with Ukraine last November reinforced the growth-to-value style-factor rotation across global and regional equity markets that began in late 2020.

Russia’s invasion of Ukraine was followed by a marked increase in stock-market volatility. The Cboe Volatility Index® (VIX) spiked from 28 on Feb. 23 to 37.5 the next day.

For investors seeking exposure to the mega-cap segment of the China A market, a simple top-50 market-cap-weighted approach can lead to large sectoral biases. We explore how a balanced mega-cap approach may help.

China provides global equity investors a unique set of opportunities and challenges as they evaluate a potential dedicated investment program and how to approach asset allocation from policy configuration to portfolio implementation.

China’s rise in economic influence, market size, improved market accessibility and inclusion in global indexes have led more investors to consider a dedicated China allocation. In the first of our “Foundations of Dedicated China Allocations” series, we discuss investment policy and asset allocation as investors think through setting up such a program.

In this first of a series of blogs covering specific index-inclusion stories, we explore China A shares’ inclusion in the MSCI Emerging Markets Index by looking back at how it occurred and what’s happened since with market and investor reaction.

Given equity market growth in the emerging markets and Asia, and the dispersion of returns across individual subregions and countries, some have looked beyond traditional long-only approaches, to others, such as futures. We explore those options.

Market turbulence amid COVID-19 presented risks and opportunities. We explore how indexes , combined with the use of fundamental data, provided a wealth of information to help identify potential market dislocations.

Though relatively new to wealth investors, index-based factor investing has some similarity to a high-conviction, outcome-oriented approach. We explore combining the two when seeking outcomes such as equity growth, yield enhancement and risk mitigation.

Having moved to Hong Kong in 2008 to help Lehman Brothers’ expansion plans, Zhen Wei, Managing Director, MSCI Research, understands what it’s like to navigate from the center of a market crisis. He shares his thoughts on Asian economic and market activity as the region begins to recover and what investors are thinking about as they try and prepare for what comes next.

During market crises, institutional investors have employed derivatives contracts to hedge market risks or express views on certain performance/risk characteristics. We explore prior use of futures for exposure management and tactical asset allocation.

Previously, we have examined the relationship between ESG characteristics and financial performance in developed markets. In this blog post, we explore whether ESG characteristics  have had financially significant effects in emerging markets and Asia.

The toll from the coronavirus has been felt throughout societies, leading to repercussions on the global economy and financial markets. We examine investor impact through markets’ economic exposures to China and factors and by stress testing portfolios.

Our analysis suggests that changes in equity-market valuations, analysts’ consensus earnings estimates and data on companies’ revenue exposure are metrics that provided insight into recent market and sector performances.

Which factors have performed best in the China A market, especially given its relatively high annualized market volatility? Is there too much risk to bear? We investigate the role that the minimum volatility factor has played.

Many institutional investors have long viewed China A shares as an inefficient market, suggesting that active strategies such as stock-picking can thrive. However, researching a universe of over 3,500 stocks comes with huge challenges, and may lead investors to question whether factor-based systematic strategies could have worked well with China A shares.

The question of who wins or loses a U.S.-China trade war has more than two possible answers. While much of the analysis has focused on China’s heavier reliance on exports to the U.S., American companies (and those who invest in them) actually have greater revenue exposure to China than the other way around. In fact, 5.1% of the revenues of companies in the MSCI USA Index come from China and may be at risk as a result of a trade war. In comparison, only 2.8% of the revenues of the companies in...

MSCI’s recent announcement that it will add 222 China A shares to its key benchmarks raises practical questions for global and emerging market investors.

Minimum volatility strategies have historically delivered above-average returns with below-average risk, especially in volatile market environments as have occurred in recent years. During this period, the world also has experienced low interest rates.

Ever since central banks slashed interest rates in response to the Global Financial Crisis, investors have been searching for yield.