China Stock Investment Returns: Terrible For 30 Years

Although it's a bear market in 2022, things could  be worse! After China's 20th Party Congress meeting, where Xi Jinping got even more powerful, Hong Kong's Hang Seng Index plummeted 6% in one day and the Hang Seng China Enterprises Index lost 9% in one week.  

In the past 30 years, the MSCI China Index has now delivered a zero percent return! A massive de-rating is the result of too much government power as international capital pulls out.  

MSCI China Returns Since Inception

Below is the China stock investment returns since inception in 1992.

MSCI China returns delivered zero percent return in 30 years

China Stock Price-To-Book Valuation

Below shows how cheap China shares in Hong Kong are. China shares price-to-book value is 0.5X in 2022, the lowest its ever been.

China stock price-to-book value

Can you imagine investing for so long only to see no progress? The potential for dismal stock market investment returns in the U.S. and elsewhere over the next 10 years is very real.  

The diversification into real estate, venture debt, venture capital, farmland, fine art, wine, rare books, and collectibles, will likely continue. The worse the stock market performs, the more investors will seek alternatives.  

Relying On Investment Returns In Retirement

If you plan to retire early and rely on stock and bond returns, it's worth reading, Preparing For A 50-Year Retirement With Vanguard's New Return Assumptions. You may have to accumulate more capital or generate supplemental more retirement income.  

Since the bear market began, from a personal finance writer's perspective, I've noticed a significant change in attitude towards many of my more “controversial” articles. 

The complaints or prickly zingers I would frequently get about my 1/10th car buying rule, 30/30/3 home buying rule, and my dynamic safe withdrawal rate recommendation, are no more. 

If you blow up your finances, you are essentially robbing yourself of life. Please utilize this bear market to reflect on why you may have gone outside your risk tolerance zone, why you thought the way you did, and adjust accordingly.  

China Stock Investment Returns In The Future

If Vanguard and other investment houses are right, China stock investment returns will likely be uninspiring for the future as well. Valuations look attractive, but they will probably stay attractive for a long time.

There is simply too much government control in China. As a result, investors can't properly assess risk. Capital should flee and diversify to other assets with less government control.

Related post: What Is Communism? We Must First Understand Capitalistic China

To Your Financial Freedom,


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