Chinese equities have won nearly $4.9 trillion this year as the country’s rapid recovery from the discovery of a new coronavirus, a series of IPOs and increased shares of consumer and technology companies.

Chinese companies listed from New York to Shanghai contributed to the year’s total of 22, according to S&P Global Market Intelligence. December contributed 41% of the $16.7 trillion. That’s more than the 21% growth of American companies, which reached $41.6 trillion.

It was a very strong year for China, he said.

Brendan Ahern,

Chief Investment Officer of KraneShares in New York. The country’s economic recovery, global investor interest in high-growth equities and a strong IPO market have had a positive impact on China, he said: The end result is a rather dramatic increase in the size of the capital markets.

According to S&P data, China will account for almost a third of global market capitalisation growth in 2020. Global assets increased by 16% to USD 104 trillion.

This increase comes despite growing friction with the United States over technology, trade and finance, as well as attempts by the U.S. government to discourage U.S. pension funds and other institutions from owning Chinese shares.

Legislation signed by the President this month

Assets

could force Chinese companies to delist on the New York Stock Exchange if their audit reports are not audited by US regulators for three consecutive years. The Trump administration has also decided to ban Americans from investing in companies that it believes support the Chinese army.

MSCI Inc.

and other index providers to reduce certain shares to benchmarks.

These achievements have strengthened China’s position as a leading emerging market. At the end of November, Chinese equities accounted for more than 40% of the two popular stock market indices tracking emerging markets, up from 30% five years ago.

Main Chinese companies by market value

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If you buy emerging markets globally, you buy Asia and China disproportionately, says Herald van der Linde, head of the Asia-Pacific Equity Strategy, at

HSBC.

The e-commerce giant

Alibaba Group Holding Ltd.

Only one country accounted for almost 7% of the 26 countries in the MSCI Emerging Index at the end of November – more than Brazil as a whole contributes to the benchmark.

There are some engines that surpass China. First, the country has shown resilience in 2020 by becoming the first major economy to return to growth after corruption.

This has confidence in Chinese stocks and in companies that supply Chinese households, such as B. van Brenner Kweichow Moutai Co. Foreign holders of renminbi shares rose more than 30% to USD 404 billion in the first nine months of 2020, according to central bank data.

The Chinese currency has also risen more than 6% against the dollar in 2020, increasing the value of shares denominated in renminbi in dollars.

At the same time there are actions in internet groups such as

Tencent Holdings Ltd.

,

Pinduoduo Inc.

and Meituan have taken off, as Chinese consumers have further changed their consumption and online habits. Globally, low interest rates and a financial system rich in liquid assets make investors enthusiastic for fast-growing companies that can prosper even in the event of a pandemic.

Rising leader

China’s weight in emerging market equity indices has risen sharply in recent years, which in turn has raised China’s status among the exchange-traded funds that follow these benchmarks.

iShares MSCI Emerging Markets ETF

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In addition, the IPO of China Inc. has created a new generation of new market entrants in areas such as telemedicine, electric vehicles and bottled water. Chinese companies that went public this year have a combined market value of nearly $ 1.3 trillion, according to S&P data.

The recovery has further strengthened China’s position in the indices used by portfolio managers to compare performance and help manage trillions of dollars in investments.

The indices also determine the composition of the funds traded on the stock exchange, such as. B.

BlackRox

iShares $28 billion MSCI Emerging Markets ETF and Vanguard $95 billion FTSE Emerging Markets ETFs held by numerous private investors.

Chinese companies listed in New York, Hong Kong, Shanghai and elsewhere accounted for 41% of emerging market equities monitored by the MSCI globally in November and 45% of the equivalent of FTSE Russell, the measure of the number of emerging market equities.

London Stock Exchange Group

SPS.

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Alibaba caused a sensation on her annual online shopping day, Singles Day, on 11. Novembersales reached a record $75 billion, the company said in a test of Chinese consumer confidence.

Photo:

Cilai Shen/Bloomberg News

China’s importance for global investors and its share of the benchmark is expected to increase in 2021 and beyond. Currently, the huge onshore markets are still undervalued against the dollar. The reason for this is that the indices give less weight to markets that are difficult to access and to companies where a large proportion of the shares are held by large, long-term shareholders.

The value of yuan-denominated shares listed in Shanghai and Shenzhen has recently reached almost 11 trillion dollars, making the Chinese mainland stock exchange the second largest after the United States.

However, A shares have only been included in the main indices in recent years and their influence is declining. For example, the MSCI treats a $10 billion company as being worth 2 and applies an inclusion factor of 20% to limit the size of the A-share. In total, Chinese shares on the mainland represent around 5% of the most important shares in emerging markets.

Alexander Treves,

J.P. Morgan Asset Management’s emerging markets and Asia-Pacific equity specialist J.P. Morgan Asset Management said that marginal market investors want to increase their equity holdings in mainland China. Compared to the size of her companies, she is still under-represented in the benchmarks, he said.

The inclusion factors for A shares could reach 100% within a few years as more Chinese companies go public and the number of shares floating in other companies increases, increasing China’s influence, according to Mark Makepeace, former head of indices at the LSE and co-founder of the FTSE: Inside Story.

Everyone will have to look at China, Makepeace said. A call to China and the United States in five to seven years will determine your success. Make a mistake and you won’t.

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The shares of technology companies such as Tencent have increased.

Photo:

Huang Zongzhi/Zuma Press

Write to Quentin Webb at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

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