The outlook for China equities is optimistic

THE core message of the recent Morgan Stanley Blue Paper "Why We Are Bullish on China" is that Chinese equities can continue to outperform emerging-market equities in the future, as they have done for some time.

Cumulative outperformance over the last 15 years for MSCI China versus MSCI EM has been 5,000 basis points, or around 3 per cent per year. China has also outperformed emerging markets over both five and ten years, and not by small amounts. Total returns have averaged 5 per cent per year in US dollar terms over those periods, and 13 per cent per year over the last 15 years.

For us, being overweight China equities in our recommended allocation to clients investing in the EM space is not unusual.