Research Insight - China: Hard Landing or Gentle Descent? - September 2014

categories: Indexes, Portfolio Management Analytics, Americas, EMEAI, Risk Management Analytics, Asset Allocation and Asset Liability Management, Investing (Investment Management), Risk Management, WINKELMANN Kurt, Asia Pacific, Asset Owners, Hedge Funds, Equities, Australia, Asset Pricing and Valuation, Research Paper, SURYANARAYANAN Raghu, VARGA Katalin, Asset Managers (Quant or Fundamental), Banks, BARLAS Jahiz

Investors have expressed concerns about an imminent hard landing in China and potential long-term effects on both global growth and global equity returns. The MSCI Macroeconomic Model forecasts indicate that an imminent hard landing is unlikely: GDP growth in China could meet the official target of 7.5% by the end of the year. Moreover, the MSCI Asset Pricing Model indicates that Chinese real growth risk is a small contributor to long-term global equity risk. In addition, our models indicate that Chinese equities carry a long-term premium to compensate investors for bearing the risk of disruptions in Chinese economic growth.

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