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Proprietary Data Insights Financial Pros Chinese Stock Searches November
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Alternative Ways To Invest In China In our main story, we cover China’s recent moves to take its companies off American stock exchanges and push them back to Hong Kong. For many US investors, that makes investing in China toxic. But that doesn’t make it impossible. While individual companies may be off the table, we can still use Chinese ETFs to invest in China and diversify our risk. ETFs directly invest in the listed share on the home exchanges for foreign companies. So, they aren’t subject to delisting. There are two popular Chinese ETFs we want to cover. The first is the iShares China Large-Cap ETF FXI. This ETF tracks a market-cap-weighted index of the 50 largest Chinese stocks traded on the Hong Kong Stock Exchange. The top 10 include the following: The second is the Xtrackers Harvest CSI 300 China A-Shares ETF ASHR. This ETF tracks an index of the 300 largest and most liquid Chinese shares traded on the Shanghai and Shenzhen exchanges. The top 10 include the following: The big difference between these two is where they invest. FXI owns companies listed on the Hong Kong Hang Seng exchange. ASHR owns companies listed in mainland China’s Shanghai and Shenzhen. Remember, Hong Kong still operates somewhat differently than the rest of China, though less so these days. These two ETFs are good options to invest in China without worrying about the risk of a company delisting. |
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Didi Goes Bye Bye |
Key Takeaways
Didi (DIDI) won’t be traded on US exchanges much longer after China’s government took another step into its data-sharing crackdown. Delist or Be Gone! Chinese regulators told Didi the company needed to delist from American exchanges immediately. The IPO, which hit with fanfare back in June, immediately slammed into a brick wall when government officials raised concerns about data sharing issues. China’s latest move aims to crack down on Variable Interest Entities (VIEs) that company’s like Alibaba (BABA), Baidu (BIDU), and other Chinese companies used to list on American exchanges. At the same time, Washington seeks to tighten restrictions on Chinese companies listed on American exchanges, aiming to tighten auditing requirements. The Future of Chinese Stocks In America The move is expected to keep many Chinese tech firms from listing on American exchanges, instead opting for Hong Kong’s Hang Seng. That’s not as ideal as listing on the US exchanges but not terrible either. Still, that could impact nearly $1.1 trillion of US investments. China is also preparing new rules that would require companies with more than 1 million users to go through a cybersecurity review before listing outside China. For most tech startups, that may prove to be an insurmountable hurdle. The Bottom Line: All Chinese stocks listed in the U.S. are at risk of delisting no matter what they do. If you own or plan to own any of these companies, make sure you account for this additional risk. |
