Social Sharing
Extended Viewer
China Exposure in Global Capital Flows
Dec 11, 2024
With China’s opening of its domestic capital markets to the world in the early 2000s, and major index providers’ adding China A shares to their global indexes in 2018, foreign participation in China’s capital markets has grown rapidly, increasing their sensitivity to global fund flows and volatility. As a result, right-sizing China exposure in portfolios has become an increasingly important consideration for global investors.
To address this need, we propose a quantitative framework for tracking international economic and financial trends through a range of indicators — leading, concurrent and lagging — to help clarify their multi-layered impact on China’s markets and economy. A comprehensive analysis of these indicators may help investors develop a balanced perspective of international economic and financial dynamics and a better understanding of the opportunities and risks associated with their China equity portfolio.
In this report we applied the framework to China investing, but the approach can be adapted to assess exposure to other markets.
A framework for tracking linkages of international economic and financial flows
Download report
Related content
Evaluating Chinese Equities’ Performance After Stimulus
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.
Learn moreFoundations of Dedicated China Allocations: Part 4
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.
Explore moreSector-Balanced Futures – One Way to Manage Chinese Equity Exposure
Rising volatility since late September’s stimulus announcement by the Chinese government has motivated some to reassess the current opportunities and risks in Chinese equities. We analyze one tool at investors’ disposal.
Read more