China’s stock market (based on the MSCI China Index, which includes local Chinese listings and listings in Hong Kong) has lagged badly, whether compared to rest of the Emerging Market universe or to the developed market universe. The underperformance began in early 2021 and mostly continued since then, with a short rebound earlier this year that has since been reversed.
And the underperformance relative to developed markets (based on the MSCI World index) in US dollar terms (reflected in the US-listed ETFs that track the indices) has been quite dramatic. Since the interim peak in relative performance in mid-February 2021, the MSCI China ETF (MCHI) has returned -49%, while the MSCI World Index (ticker URTH) has returned -4%, a 45% underperformance in about 18 months.
Among the biggest losers from COVID-19 and the resulting work-from-home trends that followed was the commercial real estate industry. Office buildings and retail stores that had been mostly full in 2019 were suddenly empty, and the companies that had been renting the space were often unable or unwilling to continue paying. And while stimulus support has helped much of the economy, the impact on commercial real estate has been more limited.
Much of the attention in equity markets has been focused on the Technology sector, many of whose constituents are reporting Q2 earnings now. The Technology sector has outperformed dramatically both in the US and globally in recent years as well as for the year-to-date. This has raised questions about whether the sector is “overowned” and overvalued, particularly given its unusually high weighting in the S&P 500 index now.