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iShares MSCI China ETF

MCHI:NASDAQ

equity ETF | passive | BlackRock, Inc. | Tracks MSCI

Market Price

US$62.66 (26 Jan 2026)

+31.42% (YoY)

NAV

US$62.82

-0.26% Discount

Yield

2.10%

-10.57% (YoY)

Expense Ratio

59.00%

-10% vs Avg: 66.00%

Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF offers broad, market-cap-weighted exposure to Chinese equities, encompassing large- and mid-cap companies. With a competitive expense ratio and decent liquidity, it serves as a straightforward vehicle for targeted China market access. The Bull case projects NAV reaching US$75.00 (+19.7%) due to policy stimulus, while the Bear case suggests US$50.00 (-20.4%) amid ongoing regulatory and demographic headwinds.

⚖️ Risk vs Reward

MCHI's underlying Chinese equity holdings currently trade at a P/E ratio of 15.64x and a P/B ratio of 2.01x, which, while not exceptionally cheap, offers a degree of value compared to higher-priced developed markets. The risk-reward profile is influenced by China's unique blend of government intervention, economic recovery efforts, and long-term structural challenges like demographic shifts. [cite: 8, 19 from previous output] Recent performance has been strong, with a 31.42% market price return over the past year, but historical volatility remains a key consideration for investors.

🚀 Why MCHI Could Soar

• Government stimulus and accommodative monetary policies could further boost corporate earnings and investor confidence in China's market, potentially driving a 15-20% upside.
• Continued recovery in domestic consumption and a stable geopolitical environment would provide strong tailwinds for underlying Chinese companies, especially in the technology and consumer discretionary sectors.
• A re-rating of Chinese equities as regulatory uncertainties ease and global investors seek diversification could lead to significant capital inflows, enhancing valuations.

⚠️ What Could Go Wrong

• Escalating trade tensions or renewed regulatory crackdowns on key industries could trigger significant market corrections, potentially leading to a 15-25% downside. [cite: 27 from previous output]
• A protracted slowdown in China's economic growth, particularly in the property sector and manufacturing, poses a material risk to corporate profitability and investor sentiment. [cite: 8, 19 from previous output]
• Demographic challenges, including a shrinking labor force and declining birth rates, present long-term structural headwinds that could dampen China's economic potential. [cite: 19 from previous output]

🏢 Fund Overview

What Are You Actually Buying

The iShares MSCI China ETF (MCHI) seeks to track an index composed of Chinese equities available to international investors, providing broad, market-cap-weighted exposure.
The fund targets large- and mid-cap companies across various sectors within China's equity markets, encompassing H-shares, B-shares, Red-chips, P-chips, and foreign listings.
This exposure offers targeted access to China's rapidly evolving economy, which is characterized by a blend of state-backed enterprises and dynamic private sector innovators, particularly in consumer and technology industries.

Market Dynamics & Outlook

China's economy is currently navigating a period of targeted stimulus and efforts to rebalance towards domestic consumption and high-tech manufacturing, influencing market sentiment.
Recent data indicates ongoing government efforts to stabilize economic growth, but challenges persist in areas such as the real estate sector and consumer confidence.
The market outlook is sensitive to geopolitical developments, trade relations, and the effectiveness of Beijing's policy measures in fostering sustainable economic expansion.

🎯 Why This Matters

Understanding MCHI's investment focus is crucial as it represents a significant portion of China's investable equity universe. The fund's performance is intrinsically linked to the country's complex economic narrative, policy shifts, and global integration challenges, making it a bellwether for direct Chinese market exposure.

📈 Valuation & Analysis

Historical Performance

YTD

+4.08%

+31.07%

Yearly Growth (3Y)

+11.23%

Yearly Growth (5Y)

-3.72%

Yearly Growth (10Y)

+4.96%

Current Valuation

The iShares MSCI China ETF (MCHI) holds a portfolio trading at a price-to-earnings (P/E) ratio of 15.64x and a price-to-book (P/B) ratio of 2.01x as of December 31, 2025. These valuation metrics position the fund as moderately valued in the broader global equity landscape. While not reflecting deep discounts, they suggest that Chinese equities are priced reasonably, particularly when considering their growth potential relative to more expensive developed markets. The fund’s trailing twelve-month (TTM) dividend yield is 2.03%. Current valuations are supported by an estimated 13% earnings growth for China's top companies, which could justify these multiples if growth materializes. [cite: 18 from previous output]

The Bull Case - Upside to

Robust Policy Support and Stimulus

Medium Probability

Aggressive fiscal and monetary stimulus from Beijing could re-ignite consumer spending and infrastructure investment, boosting corporate profits by 10-15% and pushing NAV towards US$75.00 (+19.7%) over 12-18 months.

Strong Earnings Recovery in Tech Sector

Medium Probability

Should China's tech giants demonstrate accelerated earnings growth, potentially driven by AI and digitalization, it could lead to multiple expansion and contribute 8-12% to the fund's NAV, with technology being a significant component of MCHI. [cite: 18 from previous output]

Geopolitical De-escalation and Improved Trade Relations

Probability

A significant thawing of US-China trade tensions and improved international relations would remove a major overhang on Chinese assets, attracting global capital and leading to a 5-10% valuation uplift.

The Bear Case - Downside to

Persistent Real Estate Sector Weakness

Medium Probability

A prolonged downturn in China's property market could trigger wider financial instability and dampen consumer confidence, potentially leading to a 10-15% decline in earnings and pushing NAV down towards US$50.00 (-20.4%). [cite: 18 from previous output]

Renewed Regulatory Scrutiny on Tech Sector

Medium Probability

Further unexpected regulatory actions or anti-monopoly measures targeting China's large technology companies could significantly impact profitability and investor sentiment, resulting in a 7-10% drop in market value. [cite: 27 from previous output]

Escalating Geopolitical Tensions and Trade Wars

Probability

A re-escalation of trade disputes or geopolitical conflicts with major global powers could lead to capital outflows and increased risk premiums, impacting Chinese equities by 10-15%. [cite: 27 from previous output]

Risk/Reward Assessment

The risk/reward outlook for MCHI presents a nuanced picture. On the upside, China's vast domestic market and governmental capacity for economic stimulus offer considerable growth potential, particularly if policy initiatives successfully reignite consumer and corporate spending. The current valuation, while not deeply discounted, provides a foundation for appreciation if the macroeconomic environment stabilizes and geopolitical headwinds ease. However, investors must weigh these opportunities against substantial downside risks. The fragility of the real estate sector and the ever-present potential for regulatory intervention remain significant concerns. A re-escalation of trade tensions or a failure of stimulus measures to achieve their desired effect could quickly erode gains. For investors with a long-term horizon and a higher tolerance for volatility, MCHI offers a strategic entry into the Chinese market, but active monitoring of both economic and political developments is essential.

Peer Comparison

MCHI stands out as a core holding for broad Chinese equity exposure due to its comprehensive market-cap-weighted index, encompassing a wide range of companies. Its expense ratio of 0.59% is competitive within the China equity ETF category, offering a cost-effective solution. While some peers might offer higher yields or more specialized exposure, MCHI provides a balanced approach to capture the overall performance of the Chinese market. Its substantial AUM typically ensures robust liquidity and tighter bid-ask spreads compared to smaller, more niche funds. [cite: 1, 14 from previous output]

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
iShares MSCI China ETF (MCHI) ⭐	59.00%	US$7.7B	31.07%	11.23%	-3.72%	2.03%
iShares China Large-Cap ETF (FXI)	74.00%	US$6.6B	33.86%	8.55%	-2.00%	2.72%
KraneShares CSI China Internet ETF (KWEB)	70.00%	US$8.6B	29.37%	13.91%	-52.40%	5.85%
Invesco China Technology ETF (CQQQ)	70.00%	US$2.8B	33.65%	7.27%	-8.27%	1.97%

🎯 Why This Matters

The detailed valuation and comparative analysis highlight MCHI's role as a diversified gateway to China, emphasizing its competitive cost structure and broad market access. This section is crucial for investors to assess if the fund's current pricing and risk-adjusted returns align with their portfolio objectives, especially when navigating the complex and often volatile Chinese market relative to specialized or broader market alternatives.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	0700	T	Tencent Holdings Limited	Communication Services	16.6%
2	BABAF	A	Alibaba Group Holding Limited	Consumer Cyclical	12.6%
3	0939	C	China Construction Bank Corporation	Financials	3.2%
4	1810	X	Xiaomi Corporation	Information Technology	2.7%
5	PDD	P	PDD Holdings Inc.	Consumer Cyclical	2.6%
6	3690	M	Meituan	Consumer Cyclical	2.1%
7	PIAIF	P	Ping An Insurance (Group) Company of China, Ltd.	Financials	1.9%
8	1398	I	Industrial and Commercial Bank of China Limited	Financials	1.7%
9	BYDDF	B	BYD Company Limited	Consumer Cyclical	1.6%
10	NETTF	N	NetEase, Inc.	Communication Services	1.6%

Fund Mechanics

How It Works

The iShares MSCI China ETF (MCHI) is a passively managed exchange-traded fund designed to track the investment results of the MSCI China Index. This index is a free float-adjusted market capitalization-weighted benchmark that measures the performance of large- and mid-cap equity securities in the Chinese equity markets, including H-shares, B-shares, Red-chips, P-chips, and foreign listings. The fund's investment strategy involves investing at least 80% of its assets in the component securities of this underlying index or in investments with substantially identical economic characteristics. To achieve its objective, MCHI employs a representative sampling indexing strategy, meaning it invests in a sample of securities that collectively has an investment profile similar to the index, rather than holding every single security. The index is reviewed quarterly and rebalanced semi-annually.

Holdings Breakdown

Number of Holdings

560

Top 10 Concentration

4656.0%

Top 20 Concentration

6016.0%

Turnover Rate

1200%

Category	Weight	Description
Consumer Discretionary	28.3%
Communication Services	22.2%
Financials	17.0%
Information Technology	8.0%
Materials	5.6%
Health Care	4.8%
Industrials	4.8%
Consumer Staples	3.1%
Energy	2.6%
Utilities	1.8%
Real Estate	1.5%
Cash and/or Derivatives	0.4%

Cost Efficiency

Expense Ratio

59.00%

Median Bid-Ask Spread

22.300%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown	Sharpe Ratio
2025	31.07%	31.17%	-0.10%	N/A	N/A	N/A
2024	18.06%	19.42%	-1.36%	N/A	N/A	N/A
2023	-11.07%	-11.20%	0.13%	N/A	N/A	N/A
2022	-22.53%	-21.93%	-0.60%	N/A	N/A	N/A
2021	-22.38%	-21.72%	-0.66%	N/A	N/A	N/A

Annualized Return Since Inception

3.36%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
MCHI ⭐	iShares MSCI China ETF	BlackRock, Inc.	59.00%	US$7.7B	31.1%	11.2%	-3.7%	2.03%	23.74%	0.36	N/A
FXI	iShares China Large-Cap ETF	BlackRock, Inc.	74.00%	US$6.6B	33.9%	8.6%	-2.0%	2.72%	N/A	N/A	N/A
KWEB	KraneShares CSI China Internet ETF	KraneShares	70.00%	US$8.6B	29.4%	13.9%	-52.4%	5.85%	N/A	N/A	N/A
CQQQ	Invesco China Technology ETF	Invesco	70.00%	US$2.8B	33.6%	7.3%	-8.3%	1.97%	N/A	N/A	N/A
Category Average			66.00%	—	32.1%	10.2%	-16.6%	3.14%	—	N/A	—

Risk Metrics

Beta

0.62

Alpha

-4.71

R-Squared

30.07

Standard Deviation

1 Year	3 Years	5 Years	10 Years
N/A	23.74%	24.63%	24.18%

Sharpe Ratio

1Y	3Y	5Y	10Y
1.63	0.36	-0.14	0.25

Sortino Ratio

3 Years	5 Years
2.19	N/A

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
N/A	-29.31%	N/A	-62.95%

Upside Capture

10300.0%

Downside Capture

15800.0%

Correlations

S&P 500

-0.08

Liquidity & Trading

Volume

Avg Daily Shares

2,536,313

Avg Daily Dollar Volume

US$158.9M

Trend

stable

Bid-Ask Spread

Metric	Value
Median (Percent)	22.300%
Median (Dollar)	US$0.14
During Hours	N/A
At Close	N/A
Volatility	moderate

Premium/Discount to NAV

Metric	Value
Current	-26.00%
30-Day Average	N/A
1-Year Average	N/A
Standard Deviation	N/A
Max Premium (1Y)	N/A
Max Discount (1Y)	N/A

Creation/Redemption Activity

Trend

unknown

Net Flows

Period	Net Flow
1 Year	US$1260.0M

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.