Investing in China Stock Market

From China Stock Market

Investing in Chinese stock market is one way to profit from China's booming economy. The following article assumes that you already answered yes to the question "should I invest in China stock market?" and you need to know how to do it. There are in fact multiple ways you can invest in China markets.

Buy Individual Chinese Stocks

For many investors, investing in individual China stocks offers them more choices and flexibility. However, it is also the riskiest approach to investing in China markets.

There are three different types of China stocks that foreigners can purchase, which includes China B-shares, Hong Kong red chips, China ADRs.

China B-shares are Chinese companies who list their shares on the Shanghai stock exchange and Shenzhen stock exchange but US dollar denominated. This is the riskies investment approach because of less developed securities regulations in China and potential irregularity and fraud in the market.

Hong Kong red chips refers to large Chinese companies that trade their stocks on the Hongkong stock exchange (also called H shares). These company are considered more stable financially and their stocks and trading are regulated by the more developed HK stock exchange.

China ADRs refers to stocks that are issued by Chinese companies but traded in major US stock exchanges such as NYSE or Nasdaq.

Some large Chinese companies (such as China Life Insurance, China Mobile, and Commercial and Industrial Bank of China etc.) usually have dual or triple listing of stocks. You need to be aware of how these Chinese companies stock market capitalization are calculated.

Buy Chinese Index Funds

Index funds are a low cost, efficient way of investing in China stock market. The popularity of ETFs has made investing in Chinese index funds a much easier task. ETF FXI is a great example of how you can invest in Chinese stocks easily and without huge risks of purchasing individual China stocks.

Buy China Focused Mutual Funds

There are actively managed mutual funds that focus its investment on China companies. These mutual funds usually have a higher expense ratio and may or may not be able to beat the general market.

Examples of US mutual funds that invest in China and broader Asia include Matthews China fund (MCHFX), U.S. Global Investors China Regional Opportunity fund (USCOX), Conlons Investec Mainland China Fund (ICHNX), Investec China & Hong Kong (ICHKX), Liberty Newport Greater China A (NGCAX), Alliance Greater China '97 Advantage (GCHYX), Dreyfus Premier Greater China A (DPCAX), U.S. Global Investors China Regular Opportunity and Fidelity China Region (FHKCX) etc.