Welcome to Money for the rest of us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it.

I'm your host David Stein today's episode 28. It's titled, Are you underweight Chinese stocks? Should you be? I recently

got an email from a member of Money for the rest of us plus. He lives in Switzerland

but grew up in Asia. He mentioned that he has been a long-term investor in China and

as he analyzed his Chinese equity investments in 2020, he noticed

that they didn't fall as much as stocks in other countries. And the currency held its value relative to the US dollar.

He went to look at his overall exposure to China he's trying to calibrate it within his portfolio.

He noticed that relative to the size of the Chinese economy, which is the second largest

in the world, that he was underweight Chinese stocks. In fact, the major stock

indices, MSCI, all country world index, has 5.2% in China. Yet China's gross domestic product, the

monetary value of their output is over 16% of global GDP. He was trying to figure out, well, what

should his weight be? He's primarily getting his performance through an A-Share E-T.

China A-Shares are stock shares that trade on mainland China,

and they trade in the local Chinese currency the UAN.

They trade on the Shanghai Stock Exchange and the Shenzhen Stock Exchange.

Historically these Chinese A shares are only available to domestic investors

but since 2003 China has allowed

certain institutional investors to acquire license to be able to purchase some of these Chinese A-Share stocks.

For example, back in 2015, Vanguard was first allowed to buy these Chinese A-Share stocks up to $1.5 billion.

It was at that time they added Chinese A-Share's to their emerging market stocks index fund and EDF.

Trading in A shares has typically been dominated by local Chinese investors and returns have been volatile.

In 2020, though, they gained 41 percent.

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