 |
Chinese stocks finally made the grade!
Index provider MSCI announced recently that it would include China A-share stocks in its popular emerging-market index for the very first time!
The moment was widely heralded as a coming-of-age for China’s mainland stock markets … Chinese stocks listed in Shanghai and Shenzhen.
Financial pundits, including several newsletter gurus, layered on the hype. One claimed the MSCI deal marked “one of the most important days in the history of investing …”
Well … sort of …
In reality, the actual inclusion doesn’t even take effect until summer 2018.
And initially, less than three-quarters of one-percent of the MSCI Emerging Markets Index will be allocated toward China’s A-shares.
But it’s a start. And it’s an important step in the right direction so China can open its financial markets to the world.
Until now global investors only had access to about half of China’s $8 trillion stock market, mostly through Hong Kong-listed shares. As a result, China is woefully underweighted in global stock market indexes, considering the country’s size.
 |
| Soon investors worldwide will be able to invest in many more Chinese stocks and bonds than ever before. |
China represents just under 20% of global GDP and accounts for 11% of worldwide trade. Yet Chinese stocks make up only 3.5% of the MSCI All Country World stock market index.
Eventually, the opening of China’s A-share listed stock market will live up to the hype.
About $1.6 trillion in assets track the MSCI Emerging Markets Index. So, Goldman Sachs estimates China’s A-share stocks could attract as much as $210 billion in capital inflows … not all at once mind you … but over the next five years.
Still, there’s another event on the horizon that could prove to be an even bigger deal for China’s financial markets:
The new “Bond Connect” program promises to open China’s fixed-income markets to the world.
A similar Stock Connect program allowed global investors to buy Chinese mainland stocks through Hong Kong. Now, the Bond Connect concept aims to boost investment in the Red Dragon’s bond market.
This could be an even bigger deal for China. More than $1 trillion of global fixed-income capital could flow into China’s domestic bond market over the next decade, according to Goldman Sachs.
After all, China’s bond market is already the world’s third-largest at $9.4 trillion in outstanding debt. Yet, there are very few global investors who have access to it.
Foreign investors hold just over $100 billion of Chinese bonds held by foreign investors, or less than 2% of the market.
|
Trump Budget Pledges Biggest Defense Spending Boom EVER — Donald Trump just released his 2018 budget blueprint – and it contains a huge bombshell for the defense industry. Our 45th president wants to boost defense spending by a stunning $54 billion, or 10%, next fiscal year alone. All told, the Defense Department is on track to receive a $574 billion windfall. And that doesn’t even include supplemental spending for 2017 … OR billions more in security-related spending at the Department of Homeland Security and other agencies! Which defense contractors will reap rich rewards as a result? How can you grab your share of the profits as their shares soar? Get my just-released special report American Arms Bonanza to find out by clicking here. |
And China has at least two big incentives to open up its mainland bond market to new investors:
First, Beijing wants its currency, the yuan, to become more actively traded in foreign-exchange markets. So it’s a great way to open up its financial markets, including both stocks and bonds, to overseas investors.
Second, China’s growth in recent years has been fueled almost entirely by debt issued domestically. This debt has been issued by either government entities or state-owned enterprises, which are backstopped by Beijing. By opening its bond market, China can entice international investors to fund China’s future growth.
And higher yields should beckon global investors. China’s 10-year bonds yield 3.5%. That’s much higher than comparable U.S. Treasuries at just over 2%. And European and Japanese bonds that yield less than half-a-percent!
Good investing,
Mike Burnick
P.S. Every model I trust shows gold bullion soaring to over $5,000 per ounce. That’s a 287% increase from today’s price. Here’s the ONE gold investment that is virtually guaranteed to do 68 times better. Read More Here …
Mike Burnick, with 30 years of professional investment experience, is the Executive Director for The Edelson Institute, where he is the editor of Real Wealth Report, Gold Mining Millionaire, and E-Wave Trader. Mike has been a Registered Investment Adviser and portfolio manager responsible for the day-to-day operations of a mutual fund. He also served as Director of Research for Weiss Capital Management, where he assisted with trading and asset-allocation responsibilities for a $5 million ETF portfolio.
{ 1 comment }
Since China has enabled Korea to develop nuclear war heads for ICBMs aimed at America, it is disgusting that Goldman and wall street will be profiting from brokering Chinese bonds to American pension funds. This situation reminds me of the financing of the NAZI war machine by American based financial funds. Yes, this is true. Check the history of what happened prior to the NAZI government start of World War II.