3 Reasons To Invest In China NOW (& 2 Reasons Why You Shouldn't)

In this video we discuss the whether you should invest in Chinese stocks via the Hong Kong stock exchange.

We’re only 2 weeks into 2023 and the Hang Seng Index is already up nearly 10% YTD. If we zoom out a bit more, its even more impressive as it has risen by over 30% in the last 3 months alone. This comes mainly from the fact that the Chinese government finally decided to lift restrictions after what felt like forever.

As we already know by now, lockdowns are bad for the economy which is a big reason why Chinese stocks were down for such a long time. Now that they’re open though, the economy is really starting to recover and their stocks are starting to make a run. This makes it an opportune time for us to consider investing into stocks trading on the Hong Kong stock market.

WHY ARE CHINESE COMPANIES LISTED IN HONG KONG?

Retail foreign investors can’t purchase shares directly from markets like the Shanghai exchange as its exclusive to locals. To circumvent this, these companies also have H-Class shares which are listed on the HK stock market.

PRO#1: 2023 STOCK RECOVERY

The reopening of China will be a huge tailwind to Chinese companies. This is similar to what happened globally after we started reopening. In the US there was the added boost of unlimited quantitative easing aka the FED printing money which we probably won’t see in China, but there’s still potential for large gains.

I’m not saying that these stocks will go on to do what the US tech companies did in 2020/2021, but we should see a gradual recovery to where they were before all of this happened

PRO#2: DIVERSIFICATION

This is especially for those of you who are like me and are nearly fully invested into the US stock market. This opens us up to risks that can happen at any time like what happened to China over the last few years.

There’s been lots of debate on whether the US markets will continue dominating moving forward which is making me consider shifting my portfolio allocation more towards stocks outside of the US.

I’m not making any rash decisions though, but its nice to have another high potential market get back to its feet because tbh markets like Japan and Europe aren’t that interesting.

PRO#3: FAMILIAR NAMES

Chinese stocks is have many large names that most of us are pretty familiar with. Outside the US, they probably have the largest share of well-known companies that operate globally.

Think of names like Alibaba, Xiaomi, AIA and many more that not only operate in countries like Malaysia & Singapore but are also household names.

CON#1: GEOPOLITICAL RISK

No matter how attractive Chinese stocks look on a valuation basis, they always seem to trade at a discount and that’s down to the fact that there will always be geopolitical risks.

We never know what new policies their government will introduce on a whim. For example, they cracked down on online education companies which led to the stocks falling up to 70% in one day.

These things can happen in any country but China is definitely a lot more trigger happy with policy changes.

This was one of the reasons why I didn’t want to invest in Chinese companies back then as the risk/reward just didn’t make sense.

In recent times though they seem to a bit more chill which is good, but the main factor for me now is that the valuations are a lot better which makes the risk potentially worth taking. However, this should be decided based on your risk appetite.

CON#2: HIGH BARRIERS

There’s a high barrier to entry for stocks listed on the HK exchange. Similar to stocks on the Bursa exchange, they trade in lots of 100 shares.

Unlike stocks on the Bursa exchange though, stock prices tend to be a bit more on the high side especially for the good quality ones.

Buying Alibaba’s HK listed shares will cost you a minimum of 11,200 HKD as of today which is about RM6.2k

You can instead purchase their ADR listed in the US for $115 or roughly RM500 which significantly reduces the barrier of entry.

Of course not all Chinese companies are also listed in the US so you might have to go through the HK exchange.

If you have a large portfolio then this shouldn’t be an issue to you but for those of you who are just starting to build things out, the HK market may not be the most beginner-friendly choice out there

Hey! Thanks for reading the description. We can't fit everything in here, so make sure to watch the whole video to find out more!

⌚ Timecodes:

00:00 - 3 Reasons Why You Should Invest In China NOW (& 2 Reasons Why You Shouldn't)
1:53 - Pro #1
3:13 - Pro #2
4:09 - Pro #3
5:02 - Con #1
6:36 - Con #2
8:11 - Best way to buy Chinese stocks

Tell us in the comments if you liked this video and what other kinds of videos you would like to see.

#TheMillennialFinance

[TinaElla]

In this market where the bulls are short and the bears are long, the mentality is important to make money, right? It seems that I only rely on the news surface and technical surface is not enough, in the future to learn more from you.

[stk]

bro dont forget to include "these are not financial advice" disclaimer ya

[astrodomelife]

my financial advisor once told me to move my european unit trust fund to china unit trust fund on September as she confirm that China is scrapping covid policy and i should have believe her but i deadass not instead to put in malaysia unit trust fund. now china roaring back to life like. so much since october and i start to FOMO right now. lol