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China Stocks in the U.S., Hong Kong and Shanghai

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wall_street(Sept. 15, 2009 - Chinavestor) If you want to buy shares of Chinese companies, you have three markets to consider: The USA, Hong Kong and Shanghai. Some Chinese companies are listed in London and smaller markets like Singapore or other European cities, but 99% of quality companies that should be of your interest are listed in New York, Shanghai and/or Hong Kong.

If you are a westerner, you are not allowed to participate in Shanghai. That stock market is closed to foreigners, only selected number of investment banks are allowed to trade there. Shanghai is home to over 800 companies but those listed there are reporting in accordance to Chinese accounting standards, something that makes western investors cautious. Shares of Chinese companies listed in Shanghai are called A-shares. The market is very liquid with a total market capitalization of over $2.3 trillion as of today. The main index of the market is The Shanghai Composite Index (SHA:000001), a market cap weighted index of 865 companies.

The second market that comes to play is Hong Kong. This former colony is open to western investors, making it a favorite place for western bound Chinese companies. Hong Kong regulators require much stringent financial discipline from companies that want to list in there. This in turn raises the quality of stocks trading in Hong Kong. Shares of Chinese companies listed in Hong Kong are called H-shares. Their performance is tracked by the H-shares Index or ^HSCE. The most commonly used  index of Hong Kong is called the Hang Seng Index (HANGSENGINDEX:.HSI). The index is market cap weighted and has 44 members.

The third market that comes to play is in New York where numerous Chinese companies are listed. The NYSE is the host for the largest cap Chinese blue chip companies.The market is not as liquid for Chinese companies as it is in Hong Kong or Shanghai, but given the difficult to trade in Hong Kong and Shanghai, New York commences an important place for western investors. Foreign companies, such as Chinese, are not allowed to trade in New York but certain banks act as depositors, issuing certificates or receipts. These are called American Depository Receipts or ADRs. For instance, 100 Petrochina A-shares equal to one Petrochina ADR and these ADRs are actively traded on the NYSE.

New York hosts a number of additional stock exchanges where Chinese ADRs are traded. The NASDAQ, AmEx , the OTC and the Pinks all offer Chinese stocks for trade. NASDAQ is a relatively well regulated market, a favorite market for smaller cap, entrepreneurial companies. This is the home to Baidu.com (NASDAQ:BIDU), China's most dominant search engine company, among others.

 



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