Article by Reshma Kapadia of Barrons.com
China is the 800-pound panda in any conversation about what is going on in the world today. The nation dominates the headlines, is the most-cited reason for sleeplessness among corporate executives, and puzzles investors daily. China looms particularly large for investors in the emerging markets: It represents an uncomfortably outsize stake in most portfolios. And fund managers are getting nervous.
The challenges are daunting. China is growing at its slowest pace in decades — a slowdown that began before the trade war. In past downturns, Beijing printed massive amounts of money to stimulate the economy, but that has resulted in high government debt that prevents it from taking similar measures now. China has also been bracing for a protracted struggle in the conflict with the U.S. over not just trade, but also technology and geopolitical leadership. To complicate the situation, mass pro-democracy protests in Hong Kong that began in June are still going strong, presenting the biggest threat to Beijing’s power in decades.
Not surprisingly, stock investors are reassessing their China stakes and have pulled $13 billion out of equities this year, according to EPFR Global. Meanwhile, the MSCI Emerging Markets index is increasingly a China play: Nearly a third of its weighting is in China, up from 19% just five years ago. Continue reading Emerging Market Funds Try to Sidestep China