MSCI China relative returns fall to the lowest level since 25 years: why is global capital starting to turn back?

01 Starting with a chart from Bloomberg: Why has MSCI China slid to a historical low?

Recently, Bloomberg reignited market debate about China assets’ relative performance with a single chart: measured by the ratio of the MSCI China Index to the MSCI World Index, returns from Chinese stocks relative to global stocks have fallen to a rare low level not seen since 2001.

The chart has drawn attention not because it reveals a brand-new fact, but because it visualizes the “temperature gap” investors have been feeling over the past few years in a very direct way—global equity markets keep setting fresh highs, driven by AI, semiconductors, cloud computing, and major U.S. tech companies, while China’s core assets have spent a longer period in a process of valuation digestion, earnings repair, and rebuilding risk appetite.

But to understand this chart, first you need to understand what MSCI China is. It is not a simple A-share index, nor is it an index focused purely on China’s advanced manufacturing or China technology. Instead, it is a comprehensive index covering A-shares, H-shares, red chips, P-shares, and overseas-listed Chinese companies, with higher off-shore weight; internet platforms, financials, consumption, and some Hong Kong stock leaders make up a large proportion.

As of the end of June 2026, the top 10 weighted stocks in the MSCI China Index include Tencent, Alibaba, Construction Bank H-share, Industrial and Commercial Bank of China H-share, Xiaomi, NetEase, Meituan, Pinduoduo ADR, Bank of China H-share, and Ping An Insurance H-share, with a combined weight of about 40%. By sector, the three major segments—consumer discretionary, financials, and communication services—together account for more than 60%; information technology’s weight is also clearly lower than the U.S. tech and semiconductor exposure within the MSCI World Index.

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