(July 3): The Chinese economy is almost alone in forecasting growth for 2020 and beyond. Tapping into this investment market is easier than ever with the progress of the Cross Connect programme between Hong Kong and the Shanghai and Shenzhen exchanges. There are five methods I use to invest in the Chinese economic recovery.
The first is by using an exchange traded fund that tracks the Shanghai Index. As expected, this ETF gives investors a return matching the performance of the underlying index. However not all China “index” funds are the same. Some include a mixture of mainland and Hong Kong-listed Red Chips. These ETFs provide another method to participate in the China market. My preference is for direct exposure to the Shanghai Index.
The second method is direct investing in mainland companies. This is enabled by the Cross Connect programme and participating brokers. I do not read Chinese quickly enough to apply fundamental analysis, so stock selection is based on pure technical and chart analysis. The focus is on strong trend behaviour and trend breakouts. These is the same methods we apply to Western markets. Recent Shanghai-listed trades include 600859, 600079, 600867, 600600 and 603223.