The weighted average performance of all the A-shares versions of stocks in WTEMHY was 96% over the prior year, while the H-shares in WTEMHY were up just 19%.
Valuation and Return Differences between H-Shares and A-Shares
If you look back over 15 years, there is an interesting comparison between the Shanghai Composite of A-shares and the MSCI China Index. Following the market crash in 2008, the Shanghai Composite languished and underperformed the H-shares MSCI China Index significantly over the next five years. Starting in late June 2014, that performance gap started to close with the very strong returns in the A-shares, and the performance of A-shares recently eclipsed H-shares’ performance cumulatively.
Index Performance Comparison
With the Chinese market regularly moving 5% every day, it is tough to call what will happen in the short term for China. One thing that’s clear to me, though, is that not all stocks in China are in high-valuation, bubble-like territory. Certainly the volatility makes investing there highly uncertain, but it looks like there are good value stocks to be had in diversified emerging market strategies that focus on relative valuations in China.
1Source: Bloomberg, 6/12/15–7/8/15.
2Source: Bloomberg, 7/9/15.
3Source: Bloomberg, 7/9/14–7/9/15.
Important Risks Related to this Article
Investments in emerging, offshore or frontier markets are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation and intervention or political developments.
Investments focused in China increase the impact of events and developments associated with the region, which can adversely affect performance.