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Philip van Doorn

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Aug. 13, 2019, 10:20 a.m. EDT

These are the Chinese stocks analysts say you should buy

Chinese stocks have underperformed U.S. stocks for years, making them a bargain

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    iShares MSCI China ETF (MCHI)
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By Philip van Doorn, MarketWatch


Bloomberg
Tencent Holdings is the largest holding of the iShares MSCI China ETF.

Billionaire investor Ray Dalio last week reminded investors what’s important about China: Its rapid and sustained economic growth is so important that it’s risky not to invest there.

He also compared the scope of China’s rise to that of the British Empire and to the industrial revolution.

Chinese stocks have broadly underperformed U.S. stocks for many years. But over the next decade, you might be well-served by diversifying your holdings and investing at least some of your money in the most populous country.

Use fear to your advantage

Investing in China is thought to be risky, not least because of the daily dose of frightening headlines about the U.S.-China trade conflict or the unrest in Hong Kong:

• When the unthinkable happens: U.S.-China trade negotiations break down for good

• Hong Kong protests hit London markets

• Trade war is raising the risk of U.S. recession, Goldman Sachs warns

• One man stands between us and a currency war

That’s not to say there isn’t any risk. But when is fear overdone?

China ETF

The iShares MSCI China ETF /zigman2/quotes/206267952/composite MCHI +0.82%  tracks the MSCI China Index, which includes 390 stocks of Chinese companies that are available to international investors. For stocks or American depositary receipts (ADRs) listed on U.S. exchanges, the U.S. tickers are used.

To put things into perspective, here are several charts comparing the performance of MCHI, which was established March 29, 2011, to the SPDR S&P 500 ETF /zigman2/quotes/209901640/composite SPY +0.91% .

First, a one-year chart through Aug. 9:


FactSet

Now two years:


FactSet
/zigman2/quotes/206267952/composite
US : U.S.: Nasdaq
$ 60.50
+0.49 +0.82%
Volume: 2.35M
Dec. 6, 2019 4:00p
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/zigman2/quotes/209901640/composite
US : U.S.: NYSE Arca
$ 314.87
+2.85 +0.91%
Volume: 48.96M
Dec. 6, 2019 8:00p
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