Chinese Companies Are Not As Dangerous As You Think
The scandals regarding corporate mis-governance of Chinese companies back in 2000 has left a deep mistrust of Chinese companies for many investors.
Back then, there were many cases of misappropriation of assets, fraudulent accounting, taking advantage of minority shareholders, reverse mergers…
However, it has been 20 years on – and we believe China has cleaned up much of its act and introduced financial reforms with strict regulations on par with those of international bodies.
For instance, Chinese companies have been complying with China GAAP since 2007, and its reporting structure very similar to US GAAP. Over the years, China GAAP has been converging closer to the international reporting standard and is last reported to be 90% similar to IFRS.
China is even in negotiations with the US SEC to revise its audit rules and to open up Chinese ADRs for on-site audit inspections of Chinese companies listed on the NASDAQ and NYSE.
This gives us a lot of confidence that China’s capital markets is becoming increasingly transparent for retail investors like us.
But don’t take our word for it – the revered Charlie Munger has been investing in China for over 15 years and he said this in a Forbes interview,
“the strongest companies in the world are not in America… I think Chinese companies are stronger than ours and are growing faster.”
That said, we don’t want to blindly believe what Chinese companies report on their financial statements.
How To Buy Chinese Stocks How To Invest In China 6 Etfs
Last Updated: 4 min. read
Chinas economy has grown rapidly over the past few decades. Here we look at how to invest in Chinese stocks with 6 popular ETFs.
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Ashr Xtrackers Harvest Csi 300 China A
The Xtrackers Harvest CSI 300 China A-Shares ETF tracks the CSI 300 Index, an index of the 300 largest Chinese stocks traded on the Shanghai and Shenzhen exchanges. The fund holds the highly-sought-after China A-shares, which U.S. investors have historically been prevented from accessing. Note that this fund naturally tilts heavily to Financials. It has an expense ratio of 0.65%.
Econ Calendar: Payrolls Jolts Adp Help Cue The Fed
The coming week will be a huge one for labor market data, capped by the August employment report on Friday at 8:30 a.m. ET. The stakes are high following Federal Reserve chair Jerome Powell’s Jackson Hole speech emphasizing the resolve to keep rates high until the risk of high inflation has receded, since the too-tight labor market is the biggest inflation risk. July’s jobs data showed things moving in the wrong direction with hiring heated up. The unemployment rate fell to 3.5%, matching a half-century low, and the labor force shrank.
Before the pivotal jobs report, which could swing the Fed toward a 75-basis-point interest rate hike on Sept. 21, we’ll get two other significant reports. The Labor Department’s job openings and labor turnover survey, known as the JOLTS report, is out on Tuesday at 10 a.m. It should continue to show a decline in the elevated number of job openings. On Wednesday at 8:15 a.m., payroll firm ADP will release its monthly employment report for the first time since May. The report has been enhanced with an expanded survey group and the inclusion of wage data. On Thursday at 10 a.m., the Institute for Supply Management’s manufacturing survey index will show whether growth continues to fade for the factory sector, which has been seeing falling new orders and smaller production gains.
Security Software: Crowdstrike Sentinelone Okta
A round of top cybersecurity brands weigh in during the coming week, just after Palo Alto Networks tripped a modest industry rally Monday with solid fiscal Q4 results and strong guidance. CrowdStrike Holdings reports earnings on Tuesday, with computer security firms SentinelOne and Okta following on Thursday. June/July quarter earnings results have been mixed for cybersecurity firms. For CrowdStrike, analysts project a 154% earnings jump to 28 cents a share. Analysts target revenue of $516 million, up nearly 53%. Annual recurring revenue will be a key item to watch, with consensus views eyeing $2.114 billion, a 57% gain. ARR rose 61% in the April quarter. For SentinelOne, analysts predict a 25-cent loss, vs. a 20-cent loss a year ago. Analysts project revenue of $95.7 million, up 108%. Analysts also expect a wider loss for Okta amid acquisitions.
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Decide What Type Of Security You Want To Purchase
Once your account is open, think about what type of security you want to purchase: stocks, mutual funds, or exchange-traded funds.
If you want to buy shares of individual companies, you want to purchase stocks.
If you want diversification and to be more passive, you want to purchase either mutual funds or ETFs that track an index.
Mutual funds can only be traded once per day after the market closes, while ETFs can be traded throughout the day.
How To Buy And Trade Stocks In China
Youre able to access a greater number of stock trading opportunities in China than anywhere else in Asia.
Indeed, Chinas three exchanges host the continents largest collection of listed companies in terms of market cap.
Recent times have been rough for China stocks though. The nations main Shanghai Composite index fell by 50% from its 2015 highs, dropping under 2,500 points towards the end of 2018.
Thats not necessarily a bad thing for a determined investor. Some equities in China are beaten down beyond a reasonable level and enjoy attractive valuations.
I could name a few stocks with good earnings, plentiful growth drivers, and solid fundamentals that are trading below their book value.
However, while trading stocks in Hong Kong is a simple task that can be done using any decent brokerage, buying stocks in mainland China as a foreigner isnt as straightforward.
Mainland China has two stock exchanges, namely the Shanghai Stock Exchange and Shenzhen Stock Exchange. Each of them includes over 1,000 listed companies. Shenzhen focuses on tech stocks in general while Shanghais exchange is more versatile.
You could easily draw comparisons between the New York Stock Exchange and Shanghais, as well as Shenzhen and the NASDAQ.
Now that our introduction is out of the way, heres how you can start trading stocks in China.
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Bochk Hong Kong Stock Trading Service
Through BOCHK you can:
- Trade all listed securities on HKEx, included Warrants, Callable Bull / Bear Contracts, ETF etc.
- Securities Margin Trading Services* .We offer extra investment capital of up to 70% of the prevailing market value of stocks.
- You can place trading instructions through our 24-hour automated trading channels, including Internet Banking, Mobile Banking and Auto Stock Trading Services Hotline.
- IPO Shares Subscription and IPO Financing*
Apart from the Hong Kong stock trading service, BOCHK provides comprehensive investment products, including investment funds, structure products etc., helping you manage funds flexibly. For details, please
For further information, please visit any of our branches or call our Personal Customer Service Hotline at +852 3988 2388.
The Shenzhen Stock Exchange
The Shenzhen Stock Exchange is a stock exchange based in the city of Shenzhen in southern Chinas Guangdong province. Launched shortly after the SSE, the SZSE has grown to become the seventh-largest in the world, with a market capitalization of RMB 37.4 trillion as of September 2021. The SZSE offers trading in A-shares and B-shares, funds, asset-backed securities, bonds, and options.
The SZSE has two main trading boards, the Main Board, and the Growth Enterprise Market board, also known as the ChiNext. A previous board, the SME board, was merged with the Main Board in April 2021.
As befits its position in the Greater Bay Area region, the SZSE is a magnet for manufacturing companies, which make up a majority of the companies listed on the Main Board . Many of the companies listed on the Main Board are also state-owned or partially state-owned.
Launched in 2009, the ChiNext mirrors the Shanghai STAR Market, focusing on small up-starts, in particular those in high-tech and emerging industries. In 2020, the CSRC allowed unprofitable companies to list on the ChiNext.
The SZSE is operated and regulated independently under the supervision of the CSRC.
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How Do You Invest In China Etfs
You can invest in ETFs that track the Chinese stock market the same way you invest in any other ETF: through a brokerage account. Once you’ve opened and funded a brokerage account, you can search through the brokerage’s ETF offerings and place a buy order for the ETF you like. Keep in mind that not all brokerages offer access to the same stocks and ETFs, so you may want to research which ETFs you’ll have access to before opening an account.
Singapore Brokers That Lets You Buy China Stocks
Do note that the commission rates listed above do not include other trading fees like stamp duty, platform fees, settlement fees and other miscellaneous fees.You should also keep in mind that some brokers may charge a custodian fee which would eat into your profits.
So, which broker should you use? Lets take a look starting with A-shares:
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How To Invest In The China Market And Stocks
Chinas fast rebound from its market crash in August has instilled investor confidence in the Chinese equities market. The Shanghai Stock Exchange Composite Index declined 8.49% on Black Monday, but by the end of November, it had regained over 30% of its value.
The size of Chinas stock market has made it a stalwart of investor sentiment. Significantly, Chinas blue chips are leading the march of Chinese equities back into positive return territory. The rebound has been across all sectors. Chinese shares in industry benchmarks such as Alibaba , China Petroleum and China Lodging are all up.
What to Know Before Buying Chinese Equities
Chinas stock markets have been operating under emergency measures enacted to bolster stock prices after several market corrections in 2015. A six-month ban was imposed on stock sales by those with more than a 5% interest in a Chinese public company. Short selling and initial public offerings have been reigned in. These measures would have minimal impact on the average investor.
Getting Started With Investing in Chinese Shares
Foreign investors can invest in B shares on Chinas Shanghai and Shenzhen stock exchanges. These shares are traded in US dollars on the Shanghai exchange and Hong Kong dollars on the Shenzhen exchange, but their face value is listed in Renminbi. are sold to Chinese investors and are denominated in Renminbi. Chinese investors can also trade A shares in the secondary market.
Major Indices for China Stocks
China Tech Share Basket
Aside from spread betting and CFD trading on individual shares within the stock market, it is now possible to trade multiple assets at once with our innovative â. These are mini CFD portfolios of stocks that revolve around a specific theme, in this case, a âChina Techâ basket. Within this basket, the following Chinese tech companies are included:
Basket trading also helps to diversify your trading portfolio, as it is possible to offset the risk of losses of certain declining stocks with the performance of other blue-chip stocks. Read more about our China Tech share basketââ here, along with a breakdown of each constituent weighting.
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Stock Market Data: A Bull’s Eye View
A few notable metrics from Yardeni Research: The federal government’s budget deficit has been shrinking, and tax revenues received a boost from inflation. The deficit has dropped to $1 trillion, down from $2.9 trillion a year ago. Commercial bank deposits reported a $172 billion increase this year, through Aug. 10. Loans, meanwhile, increased by $786 billion. Bond funds and ETFs made $87.4 billion in purchases in the 12 months through June, down from a record high of $1.1 trillion in the 12 months through April 2021. Foreign investors have been the most aggressive buyers of U.S. bonds, snapping up $840.9 billion in bonds in the 12 months through June.
Alibaba Stock Technical Analysis
Alibaba’s relative strength line has started to point downward amid recent selling pressure.
A stock’s relative strength line, found in daily and weekly charts at Investors.com, compares the stock’s daily price performance to the S& P 500. An upward-sloping RS line means the stock is outperforming the S& P 500. A downward-sloping line means the stock is lagging the S& P 500.
Alibaba stock broke out over a trend line on May 26, helped by a strong earnings report. It didn’t take long for BABA stock to reclaim its 50-day moving average. Alibaba was sandwiched between its 50-day line and 200-day line for a while, but support gave away
Alibaba’s Accumulation/Distribution Rating has improved slightly to B-.
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Baba Stock: Sluggish Ratings
Alibaba’s Composite Rating of 35 has been hurt mainly by weak price performance in recent months.
The Stock Checkup tool quickly identifies group leaders based on a combination of fundamental and technical factors.
Alibaba is expected to earn $7.22 a share in its current fiscal year 2023, down 13% compared to fiscal 2022. But growth is expected to pick up in 2024, up 13% to $8.17.
to the top-rated stocks in the group.
Liberalization Of Financial And Capital Markets
We think this is the reason why it is time to look at China and Chinese stocks now.
China is home to the SECOND-largest bond and stock market in the world worth nearly US$20 trillion – yet it is still almost entirely funded by domestic investors.
In the last decade, China has accelerated the opening of capital markets – with the most notable one being the A-share inclusion into global indices like the S& P DJIA, MSCI and the FTSE Russell. Over time, this inclusion factor has increased as Chinas stock market has increased in size.
With a larger global exposure, it has increased fund flows into China and makes markets more efficient.
Right now, China’s stock market is *still* heavily dominated by retail investors .
China’s stock market is definitely not what it used to be 20-30 years ago.
Back then, Chinese companies were involved in scandal after scandal. Misappropriation of assets, fraudulent accounting, taking advantage of minority shareholders, reverse mergers… they had it all.
However, we believe over the years China has cleaned up its act and introduced financial reforms with strict regulations on par with those of international bodies.
While we cannot guarantee there wouldn’t be risk investing in China, we think the benefits of being IN China far outweighs any perceived risk associated with it. At Dr Wealth, we dedicate an entire segment in our due diligence to looking for such red flags unique to China, before presenting our case studies to our members.
Buying Chinese Debt Securities
Consumption Upgrades & A Rising Middle Class
I’ve done a good amount of analysis on Chinese companies now – and with most theses, growth is almost always attributed to these factors.
Since opening its economy more than 40 years ago in 1978, China has undergone rapid industrialisation and urbanisation – resulting in many Chinese getting higher-paying, higher-skilled jobs… and fast growth in household incomes among the middle class.
It is estimated that by 2030, more than half of urban households would fall under the upper-middle class group – earning between US$16K – US$34K per year.By 2030, Chinas private consumption is set to reach US$12.7 trillion, about the same amount that American consumers currently spend. This figure is more than double the US$5.6 trillion Chinese consumers spent in 2019. Disposable income per capita will likely double from US$6,000 a year to US$12,000 in 2030.
As such, we can see more people from the rural areas coming to live in urban cities like Shanghai and Shenzhen, and eventually migrating there.
We are of the opinion that over the next 10-20 years, as the Chinese economy continues to shift to higher-value production and a services economy underpinned by technology, more rural areas will have to be redeveloped to meet this growth. Many rural Chinese will start to enter the mass middle class and become key drivers of the economy in the future.
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