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Do you currently hold a Chinese presence in your investment portfolio? International and/or emerging markets are common asset classes that will appear within an investor’s portfolio as it provides a form of diversification and opportunity for capital appreciation. The percentage that appears will depend upon the investor’s risk tolerance and investment time frame.
Most financial professionals will recommend between 10-20% of a portfolio to be placed into international securities. And, of this 20%, there should be a variety of countries present to further diversify the asset class. China stock has been a popular securities selection for investment portfolios in recent years as their economy has been rising steadily. In fact, China has been posting double digit growth numbers for a number of years, and in particular, over the past 2 years when other countries such as the US have faced economic struggles.
China Stock Investment Options
There are multiple ways to invest into China stock, including domestic and direct options. For investors who are looking to invest domestically, many will select mutual funds that hold a Chinese presence, will select Chinese companies trading on the US exchanges or will invest into American Depository Receipts. When Chinese stocks are listed directly on US exchanges, they must comply with the guidelines of the US regulatory bodies. When looking to invest directly into the Chinese market, some investors will look to purchase China A or B shares.
With so many choices to consider for investing into China stock, it is important to understand the mechanics of how to invest as well as the inherent risks before selecting an individual investment strategy.
China Investment Regulatory Bodies
Just as the US stock market has regulatory bodies designed to protect investors, so does China. Regulatory bodies monitor which companies are listed on the exchange, auditing the companies while on the exchange and monitoring the buying and selling securities. The Hong Kong Exchange is regulated by the Hong Kong Exchange and the Future Commission.
Understanding China Stock Shares- A and B Shares
The shares listed on China stock exchanges are primarily either A or B shares. There is some discussion about unifying the share types, but currently, A shares are what is open to foreign investors looking to purchase shares directly on the Chinese markets. And, B shares are what are specifically designated for residents of the China mainland.
With so many options on how to invest into China stock, investors are being forced to personally evaluate which options are the best for their personal portfolios and financial objectives. As the economy in China continues to expand, investors from around the world are looking for ways in which to capitalize. As with any financial decision, it is strongly advised to evaluate each investment choice thoroughly, to match the investment with your personal risk tolerance and to work with a financial professional.
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