Mainstream indices are a poor reference point for investors in China
Mainstream indices are a poor reference point for investors in China
The growth and sheer dynamism of the Chinese economy and its stock market continue to offer the potential for attractive returns for active investors in Chinese equities. It has arguably become the most dynamic equity market in the world, with more than 6,500 investable companies listed onshore and offshore. Indeed, China’s equity market capitalisation has increased by some 25 times since 2002 and it is now the second largest stock market globally, by market cap. Moreover, this growth in listed Chinese equities has occurred across a range of innovative sectors.
Despite the expanding breadth and depth of the market, however, there are a handful of huge companies which have come to dominate China and emerging market equity indices. As a result, most investors holdings in Chinese equities – be it via China, Asia or emerging markets funds – tend to be concentrated in a small number of well-known companies that have already achieved ‘mega-cap’ status.
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