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Drawing on the MSCI China Local Equity Factor Model, our new research uncovers why traditional global factor hierarchies don’t always apply. In China, the high-dividend-yield and low-volatility factors have consistently outperformed, defying global norms where momentum typically leads. This divergence offers opportunities for both local and global investors seeking to refine portfolios through precise factor exposure. Beyond identifying high-performing factors, the study demonstrates how unintentional exposures — to size, liquidity or valuation — can dilute returns. This paper makes the case for an evolved, multi-factor approach that reflects China’s market realities — dynamic, policy-sensitive and factor-diverse. By translating deep analytical insights into actionable strategies, it provides a roadmap for building smarter, more resilient portfolios in a complex market.
Annualized active return of factor indexes in the China A-share developed and emerging markets. Data over the last 15 years as of June 30, 2025. Factor strategies are represented by MSCI China A, MSCI World and MSCI Emerging Markets (EM) Factor Indexes. Mid-cap equal-weighted strategy for emerging markets is represented by MSCI Emerging Markets Equal Weighted Index.
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MSCI China A Index
The MSCI China A Index captures large and mid-cap representation across China securities listed on the Shanghai and Shenzhen exchanges. The index covers only those securities that are accessible through 'Stock Connect'. The index is designed for international investors and is calculated using China A Stock Connect listings based on the offshore RMB exchange rate (CNH).
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