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Investing in China?

With a nation of over 1 billion people and the world’s second-largest economy it is not surprising that global investors have become increasingly attracted to Chinese stocks. There is also another reason why China is so appealing to investors – China is basically a growth market and many of the Chinese companies are secular growth names. Globalization and the emergence of the middle class have turned China from a manufacturing economy to one of a consumer-driven economy. The combination of those two forces suggests China is a long-term growth story despite the continued uncertainties surrounding the COVID-19 pandemic and the potential for the delisting of Chinese companies from US stock exchanges.

As many know, investing in foreign markets can be challenging even for experienced and astute investors. There are multiple risks to consider including currency risk, regulatory issues, transparency, volatility, local/regional country risks, war, natural disasters, and even logistic challenges. So, what is the best way to invest in China?

You can buy stocks listed on Chinese exchanges such as on the Shanghai, Shenzhen, and Hong Kong stock exchanges. However, this may require you to open an account with a Chinese brokerage firm. Another way is to purchase Chinese stocks that are listed on major US stock exchanges through ADRs or American Depositary Receipts. You can also buy China ETFs or Exchange-Traded Funds. ETFs will allow investors to gain exposure to a group of Chinese stocks that trade on popular China stock markets. Enclosed below are the widely followed China Indexes, ETFs, and ADRs:

China Stock Exchange Indexes:

Shanghai Stock Exchange Composite Index (SSEC)

Dow Jones Shenzhen Index (DJSZ)

China ETFs:

iShares China Large-cap ETF (FXI) – Tracks the FTSE China 50 Index of Chinese equities traded on the Hong Kong Stock Exchange

Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR) – Tracks 300 large-and-mid cap China A-shares listed on the Shenzhen or Shanghai Stock Exchange

iShares MSCI China ETF (MCHI) – Tracks the MSCI China Index

S&P SPDR China ETF (GXC) – Tracks the S&P China BMI Index

iShares MSCI Hong Kong ETF (EWH) – Tracks an index composed of Hong Kong stocks

China ADR stocks:

Alibaba Group (BABA), Tencent Holdings Ltd (TCEHY), (JD), Baidu, Inc. (BIDU),, Inc (NTES), Pinduoduo Inc (PDD), and China Mobile Ltd. (CHL), PetroChina (PTR), China Life Insurance (LFC), China Petroleum & Chemical (SNP), TAL Education (TAL), and ZTO Education (TAL)

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