The annual Chinese equity rally – does it even exist & how to play it

In recent years an intriguing pattern has emerged in Chinese equities. Chinese equities have tended to slump in the first half of the year and then rallied strongly in the second half of the year. 2014 looks set to be no different.

The IMA China sector was the worst performing unit trust sector in the first half of 2014 but is now up nearly 12% in the last 3 months. So should investors buy now and which funds should they look at?

Is there any truth in the China rally?

There’s no denying that a pattern has emerged in Chinese equities in the last few years. Its roots lie in the Chinese New Year and corresponding government stimulus which rallied markets. In 3 out of the 4 years a first half year decline in the MSCI China Index has been seen strong strong half year rallies - at some point.