Chinese equities offer diversification potential as emerging-market correlations fall, RisCura says
FXI•Chinese equities’ three-year rolling correlation with other emerging markets fell below 0.4 at end-May 2025, from above 0.8 during much of the 2010s. The MSCI China A Index outperformed the MSCI China Index by 28 percentage points in first-half 2026.
1. Correlations and returns
RisCura said declining correlations between Chinese equities and other emerging markets may offer diversification opportunities, but do not guarantee stronger returns. The three-year rolling correlation fell below 0.4 at end-May 2025, from above 0.8 during much of the 2010s; the mainland-focused MSCI China A Index outperformed the predominantly offshore MSCI China Index by 28 percentage points in first-half 2026.
2. Assessing exposure
Different sector exposures helped drive the index divergence, RisCura said, underscoring how access to Chinese equities can affect portfolio outcomes. It advised investors to assess existing China allocations and weigh volatility, liquidity and regulatory risks alongside diversification benefits.
