Investors Piling into China’s Stocks Must Remember Portfolio Diversification

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As China’s stock market reached its highest level since the 2008 global financial crash and the country’s economic recovery accelerates, investors will continue to eye Chinese equities in 2021.

The CSI 300 index, which tracks shares on the Shanghai and Shenzhen stock exchanges, was up 1.9% on Tuesday at 5,368 points – the highest since January 2008.

These remarkable gains for Chinese equities after an impressive 2020 in which the index added over 27%, should continue in 2021 as investors seek out growth.

In relation to other major economies across the globe, China’s rally is certainly noteworthy.

As countries around the world are introducing more restrictions to limit rising coronavirus infection cases, China reported increasing industrial output and retail sales at the end of 2022, driving the country’s stock markets and currency, as well as other economies that receive a boost from domestic spending within China.

Of course, this will not go unnoticed with investors looking for growth.

That said, although the economic recovery in China will likely gain momentum, 2020 showed, perhaps a little too clearly, that certainties can shift in a heartbeat.

Therefore, investors need to make sure they have a sufficiently diversified portfolio, covering geographical regions, assets classes, sectors and currencies.

A fund manager who seeks global exposure and opportunities in Asia, particularly China, will best position investors to capitalize on the rewards in 2021.

Indeed, there is massive potential in China, and Asia in general, which will likely exceed the rest of the world this year.

However, investors must remember the importance of diversification, their best way to take advantage of the opportunities and sidestep the risks.

Nigel Green is CEO and founder of deVere Group, one of the world’s largest independent financial advisory and fintech organisations.

Photo: Open Minder