MSCI China index down 25%: ‘it’s a perfect storm for China’

on Mar 15, 2022
Updated: Aug 4, 2022
  • Goldman Sachs’ Christian Mueller-Glissmann says China is facing three major headwinds.
  • Cedar Street's Brodsky suggests shifting China exposure to surrounding markets.
  • The MSCI China Index (USD) is selling off this month, now down close to 25%.

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China stocks continued to sell-off on Tuesday after Beijing refused to participate in sanctions the U.S. imposed on Russia in response to its military operation in Ukraine.

China is facing three major headwinds

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The MSCI China Index has tanked nearly 25% this month. Still, Goldman Sachs’ Christian Mueller-Glissmann says the meltdown could continue on three major headwinds. On CNBC’s “Squawk Box Europe”, he said:

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It’s a perfect storm for China. There are three things that people are worried about. First, its involvement with Russia. Then, you had the news on ADR listing. And finally, China is dealing with another COVID wave. Together, these are making investors lower their exposure to China.

The total nominal cumulative return on the MSCI China Index since its inception in December 1992 is now approaching 0%.

What to do with China exposure?

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Also on Tuesday, Cedar Street’s Jonathan Brodsky recommended that investors shift their investment in China to the surrounding markets. In a CNBC interview, he said:

We’re recommending our clients move their China exposure specifically to Hong Kong and the surrounding markets like Taiwan and Singapore, because the regulatory risk is much more reduced there.

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A day earlier, Breakout Capital’s Ruchir Sharma backed investing in emerging markets to benefit from higher oil prices, but discouraged exposure through the iShares MSCI Emerging Markets ETF – about 30% of which is China.

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