Stock portfolios of the most valuable Chinese brands outperform market
The extreme fluctuations of China’s stock market in 2015 provided a “stress test” for the resilience of brands and the correlation between brand strength and shareholder return on investment.
During the early part of the year, the stock market rose sharply as investors pursued opportunities to make rapid profits. This activity continued to drive up stock prices until the bubble burst, on June 12. Following an initial recovery and government intervention, the market fell sharply again, on August 24.
Between June and September, the Shanghai Composite Index lost about a third of its value, before recovering some value by the end of the year. The MSCI China, a weighted index of Chinese stocks ended 2015 10.7 percent lower than its level in 2010.
In sharp contrast, the BrandZTM China Top 100 Portfolio ended the year 43.1 percent above its 2010 level. This stock portfolio consists of all the brands in the BrandZTM Top 100 Most Valuable Chinese Brands.
A separate stock portfolio of the brands in the BrandZTM China Top 100 with the strongest Brand Contribution was up 103.5 percent since 2010. Brand Contribution is a BrandZTM measurement of brand strength, the influence of brand alone on earnings, with other factors stripped away.
In other words, $100 invested in the MSCI China in 2010 would be worth only about $90 today. That $100 invested in the BrandZTM China Top 100 would be worth $143, and it would more than double to $204 in the Brand Contribution Portfolio because of the brand strength of the component stocks.
These results demonstrate several important realities: (1) brand strength provides stability, even in the most volatile market conditions; (2) investments brands made to build value are measurably rewarded in the stock market; and (3) valuable brands deliver superior shareholder returns.
For extensive analysis of attitudes and behavior influencing the Chinese stock market and the impact on brands, please see Unmasking the Individual Chinese Investor, an new BrandZ research report, available to download here.