To date, institutional investors have been able to access only part of the Chinese equity market through “H-shares”, mainland companies that are traded in Hong Kong. China A-shares, local-currency shares traded on the domestic exchanges in China, are not included in the MSCI Emerging Markets Index and are largely restricted from foreign investment. Given our support of emerging market equities as a component of many investment programs, coupled with China’s increasing importance in the global investment landscape, Rocaton believes it makes sense to study the China A-share market in more detail.
This Insights explores the rationale for; the accessibility of; and the risks of investment in China A-share companies. While we do not offer an opinion on the absolute or relative attractiveness of China as a country, here as elsewhere we do encourage the most robust alpha opportunity set in equities for active investment managers. Rocaton’s view is that active emerging market equity managers should fully consider the China A-share opportunity set for client portfolios, as they would any other region.