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

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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

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:

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%.

This is almost unbelievable…

The MSCI China Index total return (ignoring any fees, taxes, etc…) since its 12/31/92 inception is approaching a 0% nominal cumulative return

China is 30% of $EEM pic.twitter.com/DRQSZXkakl

— Jake (@EconomPic) March 15, 2022

What to do with China exposure?

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.

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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