China stock market

[Lsbcal]

I was trying to somewhat understand the worries around the Chinese stock market decline. It seems one has to distinguish between small caps and large cap stocks. Not sure if A and B shares distinctions are important.

Below is a 5 year chart of the Shanghai composite index of about 4600 securities (blue shaded) versus:
red line: S&P GXC etf: a listed US ETF of large cap China stocks (366 companies)
green line: SPY, S&P 500 index
magenta line: VWO, Vanguard Emerging Market index (28% China, probably mostly large caps)

You can see that all the real "action" in the last year has been in the Shanghai composite and this has not been reflected nearly as much in the Vanguard EM index or the large cap GXC etf.

To me it feels like a blow off in small caps not much available to us foreigners. This doesn't appear to be something that would lead to contagion in other markets. Just my guess.

 

[Totoro]

Not sure if A and B shares distinctions are important.

Not sure if you already know this. A shares were restricted until very recently, and were the likely trigger of the latest run.

B shares are denoted in USD and have been widely tradeable since 2001.

Chinese stock correction (after a very big boom) doesn't affect most worldwide indexes indeed. Only worry might be if it impacts the chinese economy as a side effect.

Frankly I don't understand all the hoopla

 

[Lsbcal]

According to Morningstar, Vanguard is planning on adding the A shares to its Emerging Markets fund:

Benz: So, these A-shares are going to be added to the FTSE Index that the Vanguard fund tracks. That's not happening until later this year, though, right?
Rawson: When we say that FTSE is making this decision, they are really making it in concert with Vanguard. Vanguard has a lot of influence over the decisions FTSE is making. It's a little bit unique because MSCI is a little bit more independent than FTSE in this regard. MSCI has decided not to add these shares at this time, so it's quite surprising that Vanguard is going to go ahead and do it because Vanguard is usually very conservative. They plan with FTSE to begin adding China A-shares to their emerging-markets index slowly and in increments to bring it closer to what would be more of a market-cap weight versus where it is now, which is zero.

Behind Vanguard's Surprising China Decision

FWIW, I only hold broad based international funds.