Hardly a day goes by without a prominent news story pertaining to China. Recent topics have covered the country’s use of forced labor and the financial troubles plaguing real estate giant Evergrande. Geopolitical stories have drawn attention to China’s military buildup, its participation in a multinational climate agreement, and its massive exports vis-a-vis the global supply chain disruption.
Indeed, headlines have included “The China Question,”1 “The New China: Opportunity or Threat?”2 and “China, U.S. Face Off Over Reforms”3. Though these might seem appropriate for 2021, they actually ran in 2005.
China has dominated headlines for decades. During this time, markets have effectively discounted news as it has emerged. Chinese equity prices have responded accordingly.
The attention to China appears disproportionate considering the relative of value of Chinese stocks. The Chinese economy has surely grown rapidly in recent decades. Still, publicly traded Chinese stocks account for only about five percent of the value of all global stocks. So, while investors should pay attention, such developments should be interpreted within a consistent and rational framework.
Diversification is the most effective tool for managing country and company specific risk. Investing broadly across and within global stock markets insulates portfolios from the isolated fate of a single company or country.
Emerging market mutual funds and ETFs provide diversified, cost-effective exposure to China. China represents only one of approximately 20 countries that comprise the emerging market universe. Moreover, certain emerging market funds accommodate investor aversions to China by excluding the country entirely. Contact us for more information.
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Social Security Gets A Boost
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow Jones Industrials Ranked By Yield
Asset Class Investment Vehicles