June 2015

The Chinese Company

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Understanding corporate China is important as never before. Not only is the mainland stock market the best performing one in the world at the moment, but international investors' ability – and need – to put money in the market is growing rapidly. Since November 2014, Shanghai shares have been accessible through Hong Kong brokerages, and Shenzhen-listed stocks will soon be added to the mix. Within the next year or two it is likely that domestic A-shares will be added to the MSCI Emerging Markets index, and over time China's weight in that benchmark will rise from the present zero to around 20%.

The problem is that Chinese firms are of wildly uneven quality, corporate governance is questionable, the regulatory system is weak, and reliable information is hard to come by. To improve the quality of knowledge about this crucial asset class, Gavekal has partnered with boutique research firm Fathom China, which since 2008 has earned a reputation as the most reliable source of background information on Chinese listed companies. This issue of CEQ focuses on the Chinese company, showcasing some of Fathom's recent work.