China Finance with A Cup of Tea Episode 1: China's Equity Market

Amid the pandemic and geopolitics, it might have gone unnoticed among foreign audiences that China is now home to the world’s second-largest equity market.

After rapid growth during the past three decades, the size of China’s stock market is nearly comparable to those of developed markets. However, this young and emerging market has certain unique characteristics. Volatility goes hand in hand with China’s higher potential long-term return.

China equities have always exhibited greater volatility and more attractive returns in the meantime. Investing in China brings different risks and greater unpredictability compared with developed markets, as illustrated by the Chinese government’s crackdown on tech and education businesses. On the other side of the coin, investors have historically been rewarded with long-term outperformance.

Chinese stocks don’t move in lockstep with other equity markets. As a result, they’re used as a portfolio-diversification tool. China A-shares have a low correlation with global equities over the past 10 years as they move in different directions most of the time. Holding A-shares in a global portfolio may help generate a better risk-return profile.

In the first episode of “China Finance with a Cup of Tea,” Caixin invited Harry Hao FU, vice chair of the Shanghai Stock Exchange’s Global Business Committee, and Neil HOSIE, Credit Suisse managing director and head of equities for Asia Pacific, to share their insights on what international investors should know about and how to navigate China’s equity market.