Quick view: MSCI decision to boost Chinese stocks



Charlie Awdry, China equities manager, provides his views on the MSCI’s decision to include China A-shares in their Emerging Markets (EM) and All Country World (ACWI) indices.

The announcement that China A-shares will be included in the MSCI Emerging Markets and MSCI All Country World indices is another symbolic step in the internationalisation of Chinese capital markets. The decision is primarily driven by efforts to improve access and increase foreign participation through the Shanghai-Hong Kong Connect scheme that links the Hong Kong stock market with mainland A-share markets in Shanghai and Shenzhen.
As active equity managers we have been researching and investing in A-share companies for many years and access these shares via ‘Connect’ in our portfolios. While we believe the short-term impact of MSCI’s decision will be limited, more analysis will now be conducted by active investment managers on these A-shares, many of which are not available through foreign markets. These ‘latecomer’ investors may be positively surprised by the quality of some of these Chinese companies and by the strong long-term performance of these shares. We believe valuations of high-quality blue chip A-share companies will likely be supported and underpinned by MSCI’s decision.

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Janus Henderson Horizon China Fund

Specific risks

  • Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
  • The Fund could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Fund.
  • Emerging markets are less established and more prone to political events than developed markets. This can mean both higher volatility and a greater risk of loss to the Fund than investing in more developed markets.
  • Changes in currency exchange rates may cause the value of your investment and any income from it to rise or fall.
  • If the Fund or a specific share class of the Fund seeks to reduce risks (such as exchange rate movements), the measures designed to do so may be ineffective, unavailable or detrimental.
  • Any security could become hard to value or to sell at a desired time and price, increasing the risk of investment losses.

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