The Chinese Economy Vs. The Chinese Stock Market

Start date makes big difference when looking at the performance of Chinese equities. Anecdotally, I've read in one hedge fund manager's memuars about how in the 80s he went to China on a business trip and has brought a pocket calculator with him. His collegues in China were absolutely amazed by it, it was the most advance tech they have seen. Fast forward to 2021 and China on its own has launched space station and sent robot to Mars. What I'm trying to say here is that China's growth started later but now that it has tarted it will likely grow faster than western economies.

To put that in numbers, if you look at MSCI China index again, if you start at 1992 then returns are 2% vs 7% of EM. However, if you start 10 years ago instead then returns are 7% vs 5% returned by EM.

Finally, hedge funds and sophisticated invesors usually have big picture macro thesis for future decades. Therefore, it's more important to understand their macro thesis and see if you agrree with it rather than try to predict future returns based on past performance.

/r/stocks Thread