Institutional Investors May Go Long MSCI China (MCHI ETF), and Short MSCI India (INDA ETF) if War Escalates post 7 April 2028
Bottom Line Up Front:
“Luck is the Residue of Design”: In 1Q 2024, DuLac Capital Advisory L.L.C. published a note that warned institutional investors should go long U.S. tech and fossil fuel energy levered to the AI tech build out boom, while going underweight MSCI China Index–
US Tech Over Mainland China Tech in 2024-2026: Especially tech constituents (CQQ)– relative to less “stakeholder capitalist” oriented, MSCI Taiwan (EWT ETF) and American Tech/Communication services (IGM ETF): Crouching DEIger, Hidden ESG Dragon: Is Collectivist Stakeholder Capitalism the Next Enron or Growth Engine?
U.S. Tech Outperformed–Results: The trade worked out quite well over the ensuing two years, with MSCI China Index (All Shares; one can use iShares MSCI China ETF, MCHI, as a proxy) underperforming U.S. Tech/Communication Services on an absolute and risk-adjusted basis.
US Tech (QQQ ETF, IGM ETF) Outperformed Mainland China Tech (CQQQ) between 2024-2026. Source: Bloomberg Terminal as of 04/06/2026
Red Cell Testing of Assumptions: Investing though requires rigorous “Red Cell” stress testing of the thesis as the market regime eventually shifts. Given the Hormuz blockade by the IRGC, creating a ‘toll booth’ for up to 1/3rd of the world’s seaborne oil according to Morgan Stanley Commodity Research Team– and previously stated by think tank, Middle East Forum– we are now at such a regime shift.
Value with Catalyst for Low Multiple Trading East Asia Cohort: DuLac Capital Advisory L.L.C. projects institutional capital allocators will now start hunting for “value with catalyst” trade themes– ones that combine potential positive beta for a commodity market that is higher for longer, while also pairing that with country exposure that is levered to the AI growth trend. But with a key caveat:
PRC GW Power Capacity Strength: Countries that have grown their GW Capacity with an “all the above” solution set, such as the People’s Republic of China over the last couple of years as the overweight. The PRC has over 3,890 GW of power capacity— much of that developed in the last few years due to its investment in wind/solar.
While country exposures that still struggle with power capacity sovereignty, such as MSCI India, as the main underweights.
Relative Investing for ACWI ex-USA Investors: As opined on 8 March 2026, we are now in a relative game, this year– so investors are right to engage in delta neutral barbell long/short trade ideas for their MSCI Global ACWI ex-USA allocations.
Going long a combination of MSCI Saudi Arabia IMI (capped) along with MSCI China (all shares), and short MSCI India, while moving out of the underweight on MSCI East Asia, may reduce the risk of upside surprise with MSCI EM Asia (EEMA ETF) cyclical constituents such as Korea and Taiwan may generate.
Luck is a Residue of Design– Not Index Hugging:
In Chief David Goggins seminal autobiography, You Can’t Hurt Me, the retired Navy SEAL– who also underwent Army Ranger School Survival training– discusses the moment that catalyzed his life from a pest controller, to being renowned as one of the toughest men on the planet. It was a long night of spraying for bugs at an Indiana Steak ‘n Shake. Future SEAL, Goggins, came home one early morning looking forward to his routine of a box of donuts and a Steak ‘n Shake double. After getting out of the shower, his TV was serendipitous fortune that he turned to the Discovery Channel where they were showing a documentary of a NAVY SEAL BUD/s training from class 234 circa 1999/2000– one of the last classes to enter before 9/11.
This dramatic documentary captures the passion, pursuit of excellence, and perfection required to make it to one of America’s most elite special operator forces. In the show, the viewer is treated to a mantra from the Drill Instructors reminding the cohort of recruits who always seem to be struggling with the “evolutions” that: “luck is the residue of design.” It was upon seeing this documentary, that the 300 pound bug sprayer, David Goggins, decided to start designing his own luck in life for the better.
Following the dramatic rescue of the downed pilot by SEAL Team Six and other special operators this past weekend, one can see the meticulous detail that America’s forces train for success. In BUD/s training, the recruits have to test themselves at mock ups of every past catastrophic– “six sigma” event risk– in special forces history: from D-Day to Operation Red Wings. There is no room for mere “index hugging” performance misconstrued as luck– operators are trained to stress test their alpha generation.
Portfolio Managers certainly do not face life or death situations when they implement their investment thesis. Nonetheless, the stakes are high as people’s pensions and 401Ks are often hanging in the balance; many special forces end up in local/state police departments upon military retirement and the last thing a PM would want to do is not identify a beta regime shift that causes such heroes to prolong their retirement in order to “save more for the golden day.” Institutional Investors would be wise to do the same at their level: volatility regime shifts– as witnessed this March 2026– cause dispersion among betas that must be rapidly captured, so that the PM team can focus their time finding the best of breed alpha generation risk drivers.
According to a report from Goldman Sachs Prime Brokerage published on Fidelity on 1 April 2026, March 2026 was the worst month on average for Hedge Funds since the Russia-Ukraine war breakout in 2022 where both bonds and stocks largely sold off hard as investors faced the twin challenges of global growth slowdown yet potential runaway commodity driven headline inflation. DuLac Capital Advisory L.L.C. specializes in “Red Cell” testing of portfolios– a concept borrowed from the founder of SEAL Team Six/DEVGRU, Commander Richard Marcinko.
According to Commander Marcinko’s autobiography,Rogue Warrior, he was tasked by the head of Navy SPECWAR to form a new elite unit that would ensure Americans would never again have a Operation Eagle Claw failure when trying to rescue compatriots behind enemy lines (as what happened with President Carter’s doomed mission to finally try to rescue USA embassy hostages in the nascent IRGC controlled Tehran).
In Vietnam, according to his interview for the book, Hunters and Shooters: an Oral History of Navy SEALs in Vietnam, Senior Chief Marcinko (at that time), was known for forcing his NAVY SEALs teammates to wear the Vietcong black “pajamas” and going on stakeouts deep behind enemy lines barefoot to confuse the enemy and even conventional American soldiers. Commander Marcinko wrote how he would often recruit commandos who were not known as the best athletes in BUD/s, but rather ones that often would finish in the 3rd quartile– exchanging the lack of natural athletic ability for true grit. His team would test military readiness by pretending to be the enemy, and “stress testing” their resilience to shocks.
Ahead of President Trump’s latest deadline (Wednesday 8 April 2028 at Midnight GMT– as Asian listed ETFs are already trading then), for the IRGC to end its blockade of Hormuz Strait, let’s stress test the thesis that Institutional Investors may now shift their long on KSA/EIS and short on broad MSCI Asia EM (EEMA) that generated 13% excess returns in March 2026, by instead pivoting to the far east.
The Pivot Ahead of President Trump’s Showdown: KSA/MCHI vs INDA ETF/MSCI India Total Return Swaps
DuLac Capital Advisory L.L.C. has identified a few key ETF/Index product signals that global ACWI ex-USA benchmarked investors are constructing a “silk road meets the Yanbu port” EM Barbell: MSCI China (MCHI ETF) with MSCI Saudi Arabia (KSA ETF), with a delta hedge by shorting commodity starved India: iShares MSCI India ETF (INDA), or iShares India 50 ETF (INDY ETF).
Multiple Discount to Peers: MCHI has experienced a multiple to earnings contraction over the last five years as institutional investors have come to rightfully fear the State’s history of private capital confiscation, such as what occurred with Ali Baba’s quantum computer a few years ago. However, with a ~20% P/E discount vs MSCI ACWI ex-USA ( 18.37 P/E for ACWX ETF vs 14.6 P/E for MCHI ETF per Bloomberg Terminal as of 4/2/2026)-- and even greater discount relative to INDA ETF (22.6 per Bloomberg Terminal as of 4/2/2026), investors may prefer the earnings yield cushion for MSCI China over MSCI India or NIFTY 50.
MCHI ETF Trades at over a 20% P/E Multiple Discount to INDA ETF (MSCI India) per Bloomberg PORT Analysis
Source: Bloomberg Terminal PORT Function as of 04/06/2026
What MCHI ETF Gives up on Size Factor Relative to INDA ETF, it Gains in 30D Idiosyncratic Return and Growth Factors
Factor Tilts Analysis from Bloomberg Terminal as of 04/06/2026
Institutional Investors may identify MSCI China as being “cheaper to keep her” relative to MSCI India–
especially considering there still is still an underpriced risk of a broad earnings revision to MSCI ACWI ex-USA commodity sensitive country constituents due to the Hormuz oil/gas/fertilizer/helium Blockade.Lower multiples relative to ACWX and MSCI India/India Nifty 50 could signal a relative allocation catalyst for institutional investors seeking a margin of safety for their portfolio utility function modeling (a function of expected Sharpe Ratios and correlation of the potential asset vs. a performance benchmark).
MCHI ETF is trading at the cheapest quartile relative to INDA ETF over the last 14 years:
INDA ETF vs MCHI ETF, returns compared against another, normalized to 100 starting 02/29/2012 (common inception). Source: Bloomberg Terminal as of 04/06/2026
MCHI ETF Short Interest ratio– Declined since War Start:
MCHI ETF Short Interest peaked at the start of the war, touching 2.5% of shares outstanding. However, throughout March 2026, institutional investors unwound their shorts on MCHI ETF, likely opting for other hedging instruments instead, and perhaps seeing room for upside surprise in the event the IRGC inks a ‘toll’ deal with the PRC.
Short Interest Ratio has Declined from 2.5% to ~ 1.6% since USA-IRGC War Inception
Short Interest Ratio Graph for MCHI ETF, Source: Bloomberg Terminal as of 04/06/2026
These three charts could be pointing to the steam of de-risking leverage associated with the People’s Republic of China may be coming to an end– especially relative to MSCI India. Multiple discount despite similar beta profiles, relative value spread ratios at the cheapest quartile, and a decline in Short Interest since the start of the war could be second order signs that MSCI China is catching a bid. According to Middle East Forum, escalation seems to be the most likely option. Therefore, per CSIS analysis, the PRC’s 1.1 Billion in Crude Oil inventory may be viewed as a buffer in the event of worse case scenarios in the coming week. MSCI China Index constituents may in fact experience less negative beta vs Brent Crude oil compared to MSCI India Index constituents in this time of unknown unknowns.