Spotlight series: 5 principles for a successful China investment strategy

#5 Our research shows a small shift into A‑shares may help improve risk/return profiles

#5 A small shift into A-shares may help improve risk/return profiles
Consider bringing A-shares into your asset allocation mix

Today, emerging markets are an essential part of most serious investors’ portfolios, and we believe China will soon be considered a similarly important asset class in its own right. Some investors are already investing in offshore China equities or ADRs through their existing emerging-market holdings.

But there is compelling evidence that tilting an emerging-market allocation towards onshore China A-shares can help improve risk/return profiles. The “sweet spot” may be found by shifting between 10% to 30% of an existing emerging-market allocation into China A-shares.

Adding China A-shares to an emerging-market allocation may help improve risk/return

Volatility vs annualised return, 2005-2020

Chart: Adding China A-shares to an emerging-market allocation may help improve risk/return

Source: Allianz Global Investors. Chart shows analysis of returns for the MSCI Emerging Market index (used as proxy for global emerging markets) and MSCI China A Onshore index (used as proxy for the China A-share market) indices from 31 January 2005 to 31 January 2020. Percentages shown on the chart represent portion of portfolio allocated to China A-shares. GEM = global emerging markets. The above is illustrative in nature and should not be considered a recommendation to purchase or sell a specific security, strategy or AllianzGI product. It is not possible to invest directly in an index.

Learn more about the China opportunity

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Spotlight series: 5 principles for a successful China investment strategy

#4 China has room for improvement on ESG, but there are signs of positive change

#4 China has room for improvement on ESG, but there are signs of positive change
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