Should we invest in Chinese shares?

Anonymous sources report that an agreement will be reached by the end of this month, but is this credible? We already hear for weeks that a deal is almost there, and every time when such news comes out, the exchange rates rise again. It is true that many obstacles have been overcome, but there are still a few to tackle. These are mostly political concerns. President Xi Jinping has to convince thousands of Chinese parliamentarians that they should agree upon concessions to the US. But the same holds for the US: Donald Trump also has many hardliners behind him, who are of the opinion that the US President should be more demanding towards the Chinese. So, both presidents still have a number of political risks to manage. 

Besides the political risks, the Chinese president also has to manage the economic growth of his country. The growth of China is stagnating and expectations about the growth rate of the coming year have already been adjusted downwards. China is now targeting a growth of 6.0-6.5 percent, while the growth of last year - which was the weakest pace since 1990 - was 6.6 percent. China has already introduced many measures to stimulate the economy and part of these measures is the decision to lower the Value Added Tax (VAT). According to Professor Mary Pieterse Bloem, the market expects that this reduction in the VAT should give the Chinese economy a boost and that investors will anticipate upon this. But can investors be optimistic about Chinese shares? According to Professor Mary Pierse-Bloem they can. The revival of Chinese shares is driven by multiple factors: not only the prospect of an agreement between the US and China, but also the inclusion of China in the MSCI Index. This is an index which investors follow worldwide and, as such, it is becoming increasingly difficult for a global fund manager to ignore China. As a result of this inclusion, more money will float to China.