Investing in Chinese stocks

Its economy is booming, but US tensions could force Chinese stocks off American exchanges.

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Interested in adding Chinese shares to your portfolio? Chinese growth stocks are plentiful and easily accessed from a domestic brokerage account in Australia. But the future of these stocks on Australian exchanges remains uncertain — especially for state-owned enterprises.

What are Chinese stocks?

Chinese stocks originate from companies that are headquartered in China. Like Australia, there are multiple Chinese stock exchanges — including the Hong Kong Stock Exchange, the Shanghai Stock Exchange and the Shenzhen Stock Exchange.

How to buy Chinese stocks from Australia

There are a few ways for Australian investors to add Chinese stocks to their portfolios, including stocks and exchange-traded funds.

With an international brokerage account, you can purchase Chinese stocks directly from Chinese exchanges. Not many Australian brokers offer international trading, but there are a few that offer access to Asian markets, including Moomoo and Interactive Brokers.

For investors who aren’t ready for an international brokerage account, numerous Chinese companies also list shares on the ASX, offering investment opportunities for Australian investors with domestic brokerage accounts.

ETFs that track Chinese stocks are another way for Australian investors to diversify into Chinese investments. And Chinese ADRs — certificates that represent shares of foreign stock — can be bought and sold from domestic brokerage accounts.

Why invest in Chinese stocks?

China’s economy is on the rise, and its businesses are poised for growth. China is the world’s second-largest economy, second only to the United States. And it enjoys this position thanks to an average economic growth rate of over 6% for nearly 30 years, making it the fastest-growing major economy in the world.

China is also the world’s largest exporter, boasting an export value of approximately $2.5 trillion USD in 2019, according to Statista. In fact, the country’s year-over-year export growth hovered near 17% from 2002 to 2012.

The bottom line? China is a major driver of economic growth and backing Chinese companies presents a potentially lucrative investment opportunity for US investors.

Risks of investing in Chinese stocks

Chinese stocks present unique risks. Many Chinese companies are state-owned, and ongoing tensions between China and the US could result in Chinese stocks being delisted from US exchanges.

In 2017, there were 102 state-owned enterprises (SOEs) in the Fortune Global 500. Of those 102 SOEs, 75 of them were from China. In fact, there are over 150,000 state-owned enterprises in China, according to the China Journal of Accounting Research. Why does this matter? These SOEs have been accused of receiving unfair advantages, like low-cost loans, while yielding less competitive returns than their privately run counterparts.

China has plans to reform its SOEs, but it’s difficult to say what this reform will look like or what impact it could have on privately-held Chinese companies.

And speaking of reform, ongoing tensions between China and the United States have led to the Holding Foreign Companies Accountable Act: a bill introduced by the US Congress that requires companies listed on US exchanges to declare any connections with foreign governments. The bill also states that companies listed on US exchanges must submit to audits of the company’s financial performance.

For Chinese companies listed on US exchanges, the bill is problematic and could potentially result in numerous Chinese stocks delisting from US exchanges.

Chinese stocks listed on Australian exchanges

Over 50 Chinese stocks trade in ASX. You can buy, sell or hold these stocks with a domestic brokerage account the same way you would any Australian stock.

Over-the-counter (OTC) Chinese stocks

There are many well-established Chinese companies that don’t trade on Australian exchanges. If you hold an international brokerage account, you can purchase shares directly from Chinese markets.

And investors with domestic brokerage accounts can invest by buying American Depositary Receipts (ADRs) in OTC exchanges. Over 150 Chinese companies are listed in Australian OTC markets. ADRs can be purchased through any domestic brokerage account that offers access to OTC investments.

  • China Railway Construction (CWYCY)
  • China Railway Group (CRWOF)
  • CITIC Ltd (CTPCF)
  • Industrial and Commercial Bank of China (IDCBY)
  • Ping An Insurance (PNGAY)

What ETFs track Chinese stocks?

Another option for Australian investors interested in adding Chinese stocks to their portfolio is by purchasing ETFs that invest in Chinese companies. While this is a less direct investment than purchasing shares, an ETF that tracks Chinese stocks offers broad exposure to a number of securities as opposed to just one.

  • iShares China Large-Cap ETF
  • VanEck Vectors China New Economy ETF
  • VanEck Vectors FTSE China A50 ETF
  • Global X MSCI China Consumer Discretionary ETF

Compare trading platforms

Many Chinese stocks can be purchased from a domestic brokerage account. Narrow down your options by comparing features, fees and research tools.

Name Product Standard brokerage fee Inactivity fee Markets International
eToro Share Trading (US stocks)
US$0
US$10 per month if there’s been no login for 12 months
US shares, ETFs
Yes
Zero brokerage share trading on US stocks with trades as low as $50.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
Superhero share trading
$5
No
ASX shares, ETFs
No
Pay zero brokerage on all Australian ETFs.
Trade ASX stocks with a flat $5 commission fee and a low minimum investment of just $100.
ThinkMarkets Share Trading
$8
No
ASX shares, ETFs
No
Limited offer: Get 5 free ASX trades when you open a new account with ThinkMarkets before June 30, 2021 (T&Cs apply).
Buy and sell CHESS sponsored ASX shares with $0 brokerage on your first 5 trades. Only $8 flat fee brokerage thereafter, plus enjoy free live stock price data on an easy to use mobile app.
Bell Direct Share Trading
$15
No
ASX shares, mFunds, ETFs
No
⭐ Finder Exclusive: Get 5 free stock trades and unlimited ETF trades until July 31, 2021 when you join Bell Direct.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
IG Share Trading
Finder Award
IG Share Trading
$8
$50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares
Yes
$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
Saxo Capital Markets (Classic account)
$6.99
No
ASX shares, Global shares, Forex, CFDs, Margin trading, Options trading, ETFs
Yes
Acess 19,000+ stocks on 37 exchanges worldwide
Low fees for Australian and global share trading, no inactivity fees, low currency conversion fee and optimised for mobile.
CMC Markets Stockbroking
$11
No
ASX shares, Global shares, mFunds, ETFs
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges.
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Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. “Standard brokerage” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

Bottom line

There are numerous ways to invest in Chinese stocks from an Australian brokerage account. And for those who prefer to invest in Asian markets directly, brokers like Moomoo and Interactive Brokers offer international brokerage accounts.

Before you open an account, explore available trading platforms by fees and available markets to find the broker that is best positioned to serve your investment goals.

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