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Equities

How to Approach a More Accessible Chinese Equity Market

March 2019 - 8 min read

Barings’ William Fong and Andrew Lee explore the different ways to access China’s onshore and offshore equity markets following the decision by MSCI to increase the weighting of China A-shares in their benchmarks.

As China continues to open up its capital markets to international investors and its representation in the global equity opportunity set expands, there is no doubt that investors are on the cusp of an exciting chapter for Chinese equities. Historically a closed asset class, China A-shares have become more accessible to global investors as the Chinese government introduced a number of measures to encourage foreign participation. Barings’ Head of Hong Kong China Equities, William Fong, and Client Portfolio Manager, Andrew Lee, explain more about the asset class, and how investors should approach it.

Introduction
Home to some of the world’s largest and fastest-growing companies, the Chinese equity market has expanded exponentially in recent years. With onshore China A-shares being incrementally added to global indexes, together with the Chinese companies listed in the offshore stock exchanges, Chinese equities now hold a much more significant representation within the global equity opportunity set. In this paper, we explore the different ways to access China’s onshore and offshore equity markets, our investment view on the asset class and the strategies Barings currently offer to specifically tap into the growth opportunities embedded within the second-largest equity market in the world.

What’s the Difference Between China A and H-Shares?
China A-shares are onshore-listed Chinese equities, trading in renminbi (CNY) on the Shanghai Stock Exchange and Shenzhen Stock Exchange. Historically, they have been inaccessible to all investors outside of mainland China. China H-shares are publicly traded Chinese companies listed offshore, on the Hong Kong Stock Exchange, which is open for trading to all investors.

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