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  • Trends with Benefits

    The China Conundrum with Carlos Diez

    Ed Lopez, Head of ETF Product
    10 September 2020

    In the 25th episode of Trends with Benefits, I speak with Carlos Diez, CEO of MarketGrader about investing in China, which has had one of the most resilient stock markets in the world this year, navigating the trade war, geopolitics and finding equity growth leaders.

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    The China Conundrum

    China is a megatrend and has been for a while. Market liberalization efforts, over the last few years, have helped China’s local markets become more accessible to foreign investors. In 2018, MSCI began adding China’s local market A-shares to their indices, representing a huge acknowledgement of the progress China has made in the development of their capital markets. However, China still represented approximately a third of broad based emerging market indices just from shares listed outside of the country. Now, with the inclusion of A-shares, it surpassed 40%. This may be an appropriate exposure if you consider investing in markets solely based on market capitalization. This approach, however, may crowd out other areas of emerging markets with growth potential such as India or Vietnam, which is on watch to be promoted from frontier market to emerging market status by major index providers.

    With the continued ascendancy of the world’s second largest economy, investors are faced with decisions about their allocation to China. Considerations include China’s weight in broad indices, navigating a market that is transitioning from an industrial, “old economy”, with many state-owned entities to a more service-oriented, “new economy”. In addition to local market dynamics are extra layers of complexity from geopolitical theater, including the ongoing trade war with the U.S. and legislation in the U.S. that could see Chinese companies get delisted from U.S. stock exchanges.

    So, does it still make sense to allocate to China? And, if so, how? Carlos has been visiting and researching China for years and as you probably guessed, he has a view. He also has an approach to navigating the Chinese markets to identify the real growth leaders.

    Trend or Fad

    Listen for Carlos’s take on moving production lines away from China, connected home fitness and ESG.

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    This commentary originates from VanEck Investments Ltd, a UCITS Management Company under Irish law regulated by the Central Bank of Ireland and VanEck Asset Management B.V., a UCITS Management Company under Dutch law regulated by the Netherlands Authority for the Financial Markets. It is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice. VanEck Investments Ltd, VanEck Asset Management B.V. and its associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this commentary. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the commentary’s publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index.

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  • Authored by

    Ed Lopez
    Head of ETF Product

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