CHINA SET FOR WORST SHOWING SINCE 2004

The Chinese market is on track of its worst showing since 2004 vis-à-vis its emerging market (EM) peers . According to the data compiled by Bloomberg, the MSCI China index has underperformed the MSCI EM (excluding China) index by 28 per cent, so far, this year. The regulatory crackdown against Chinese tech firms and concerns around real estate giant Evergrande’s default have spooked investors putting money in the Chinese markets this year. The underperformance comes after two years of outperformance. In 2020, China was the toast for global investors, outdoing most EM peers, thanks to efficient control of the Covid-19 pandemic, which made little dent to its economy. The performance of the Chinese market has a huge bearing on the EM pack as it has the biggest country weighting of about 32 per cent in the MSCI Emerging Markets Index. However, given the troubles facing China, many investors are looking to invest elsewhere in the region. Yet for all of China’s ongoing challenges, exposure to EM presents “meaningful diversification benefits” for a global multi-asset portfolio, Irene Goh, head of multi-asset solutions, Asia Pacific, with Aberdeen Standard Investments, wrote in a note. “Government measures appear sector-specific and fit a historic pattern of periodic tightening, rather than signalling the ‘end of capitalism’ as some investors have feared.” Market observers say the turmoil in the Chinese equity markets has benefited India. Currently, India is the only region among the EM big four countries, where foreign funds have an overweight position.