Making Portfolio Exposure to China Briskier with MSCI China Small Cap

The MSCI China Small Cap Index is designed to measure the performance of the small cap segment of the China market comprising the most massive growth opportunities. With 252 constituents, the index represents approximately 14% of the free float-adjusted market capitalization of the China equity universe. The iShares MSCI China Small-Cap ETF seeks to track the investment results of an index composed of small-capitalization Chinese equities that are available to international investors. There’s a lot of renewed belief that the sky has cleared for Chinese technology companies, and that now’s a good time to jump back into one of the most lucrative investment categories of the past decade.

Despite the resurgence of Covid-19 cases in some parts of China, according to data’s joint release by Refinitiv Eikon, Hong Kong Exchange and Clearing Limited, foreign investors bought a net $2.5 billion worth of Chinese stocks in May, the biggest amount in four months. Overseas investors in the A-share market, through the stock connect mechanism linking the Shanghai, Shenzhen and Hong Kong exchanges, reported a net inflow for the 10th straight session on Friday of 11.6 billion yuan ($1.73 billion). It is the longest period of net inflows this year.

The U.S. has long been testing a unipolar world, but is its economy really that comfortable at retaining a status of the first in the world?

It is clear that China is gradually becoming not only the biggest exporter for the entire world, but also, as the country’s power and prosperity accelerated over recent years, play a more and more pronounced role at becoming the world's biggest growing consumer market. China is projected to account for 18.8% of GDP at purchasing power parity (PPP) by the end of 2022. As we know, purchasing power parity, PPP, is the conversion ratio of prices for a set of goods and services in different currencies. The economy has almost doubled in 20 years.

Interestingly, the shares of the U.S. and the EU in total world GDP have been slowly but steadily declining. The fact that the latter two intend to ramp up their military expenses to counter Russia, while China has no interest in doing so, means a greater part of the Chinese economy will work for self-reinvestment, while the role of the Chinese yuan as global trade currency will grow. We observe that the gap between the economies of China, the U.S. and the EU is likely to widen over the next few years, as China, by various estimates, increases its speed at a faster pace.