Master the complete overview of Chinese stock investment: How to buy A-shares, Hong Kong stocks, and US stocks?

The Triple Investment Opportunities in China’s Stock Market

Recently, the Chinese government has introduced a series of economic stimulus policies, from interest rate cuts and lower down payment ratios in the real estate sector to dedicated funding injections in the stock market, corporate share repurchases, and increased holdings by major shareholders. These policy signals continue to release positive momentum. This wave of developments has attracted global capital, and Chinese stocks are experiencing an overdue rally.

To invest in China’s stock market, it is essential to understand several core concepts: Investing in A-shares means investing in stocks listed within China, traded on the Shanghai Stock Exchange, Shenzhen Stock Exchange, and Beijing Stock Exchange, all priced in RMB. Since China’s stock market started relatively late (the Shanghai and Shenzhen exchanges were established in 1990, and the Beijing Stock Exchange only in 2021), its rules are simpler compared to global mature markets.

Therefore, many Chinese companies choose to list overseas. Whether listed in Hong Kong or the US, these companies are collectively referred to as “Chinese concept stocks” or “Chinomics stocks.” Broadly speaking, investing in China’s stock market encompasses two dimensions: investing in A-shares and investing in overseas-listed Chinese concept stocks.

Why Do Chinese Concept Stocks Often Perform Stronger?

In recent rallies, the stocks with the largest gains are predominantly Chinese concept stocks listed in Hong Kong or the US, rather than domestic A-shares. There are three core reasons:

Capital Liquidity Advantage: Hong Kong and US markets are more attractive to international capital, offering greater liquidity. This makes Chinese concept stocks easier to garner global investor interest, further pushing up their prices.

Valuation System Differences: Overseas markets tend to be more optimistic about the growth potential of Chinese concept stocks, often assigning higher valuation multiples, which translates into larger upside potential in stock prices.

Market Information Transparency: Hong Kong and US regulatory environments are more mature, with higher disclosure standards. Investor confidence in Chinese concept stocks is thus higher, driving further price increases.

Hence, despite favorable policies for A-shares, Chinese concept stocks in Hong Kong and US markets often outperform. Investing in A-shares is important, but overseas-listed Chinese companies also deserve close attention.

Selected Chinese Stocks and Indices to Watch

Tencent (0700.HK) - Hong Kong-listed

As the largest Chinese company by market capitalization, Tencent is a flagship of Chinese enterprise. Founded in 1999 and listed in Hong Kong for over 20 years, Tencent started with software development and has continuously expanded its business, diversifying revenue sources.

The company’s revenue is structured into three main modules: Core Business Revenue (gaming, social, advertising, fintech), Financial Investments (profiting from stock investments), and Strategic Investments (equity stakes in other companies to support growth). Gaming remains the primary cash flow, and with AI technology development, the integration of virtual and real worlds will further boost gaming growth.

Notably, Tencent’s advertising revenue has significantly increased through AI-driven short video platforms, echoing the experience of tech giants like META and Google.

Tencent’s equity investment portfolio is also a growth engine. As the second-largest shareholder of Pinduoduo (holding 14.1%), and as an important investor in Meituan, Kuaishou, SEA, and other major companies (each holding over 15%), Tencent not only benefits from investment returns but also leverages influence to help these invested companies capture market share. As long as China’s economy continues to grow, Tencent will keep benefiting.

Pinduoduo (PDD.US) - US-listed

Founded in 2015 and listed on NASDAQ in 2018, Pinduoduo’s rise is closely linked to Chinese consumers’ pursuit of value-for-money during economic downturns. The “Cut One” activity (inviting friends to buy together, with lower per-unit prices as more join) quickly attracted consumers, enabling Pinduoduo to rapidly gain market share in the competitive e-commerce landscape at very low customer acquisition costs.

While other e-commerce firms saw profits decline or losses during downturns, Pinduoduo proved the viability of its business model. Its international platform Temu continues this success logic, with steady profit growth expected to reach breakeven in Q4.

Vanke (2202.HK) - Hong Kong/China-listed

As a leading real estate developer, Vanke demonstrated resilience after China’s “three red lines” policy for property developers. While many peers faced downturns, bankruptcies, or asset disposals, Vanke was among the first to secure joint bank loans. This is partly due to its background as a shareholder in Shenzhen Metro (a state-owned enterprise), giving it a quasi-state enterprise status.

Real estate is a policy-sensitive industry, and its stock price heavily depends on policy environment. After signals of policy easing, Vanke’s share price rebounded noticeably. Currently, its price-to-net-asset-value ratio is only about 0.3–0.4x, reflecting market doubts about a full recovery. If the policy benefits truly stimulate a real estate rebound, Vanke’s high-quality land reserves and projects in super first-tier cities could see significant growth.

BYD (1211.HK) - Hong Kong/China-listed

Originating from battery manufacturing for electronics, then branching into mobile assembly, and now riding the wave of electric vehicle development, BYD has become a global EV leader, ranking first in China and second worldwide after Tesla.

BYD’s competitive edge lies in its strong supply chain management. Despite selling at prices much lower than Tesla, its gross margins are comparable. Its mobile component and assembly businesses are ongoing, and these segments could benefit from AI applications’ expansion.

Ping An Insurance (2318.HK) - Hong Kong/China-listed

Ping An is China’s first joint-stock financial conglomerate, covering banking, securities, insurance, and asset management. Compared to global standards, China’s insurance penetration remains relatively low, leaving substantial growth potential.

In the first half of 2024, Ping An’s life, property, and health insurance orders steadily increased. With the recent policy-driven liquidity injection, large banks’ lending, financial product sales, fund, and insurance businesses are poised to benefit. For investors optimistic about China’s economic recovery but wary of high volatility in property stocks, financial stocks provide a relatively stable option.

FXI - iShares China Large-Cap ETF

This ETF tracks the FTSE China A50 Index, comprising the 50 largest mainland China companies by market cap, similar to Taiwan’s 0050. Compared to individual stock picking, this market-cap-weighted ETF better reflects overall economic trends.

Note that many major Chinese listed companies are state-owned enterprises, and many tech firms are listed overseas. Therefore, A50’s weight is concentrated in financials and consumer sectors, with less exposure to fast-growing tech industries, resulting in more moderate gains. For conservative investors, it remains a solid choice.

KWEB - KraneShares CSI China Internet ETF

While FXI mainly invests in physical industries, KWEB focuses on Chinese tech. Known as the only global fund dedicated to offshore Chinese tech hardware and software companies, it emphasizes leading Chinese tech giants.

The fund holds about 50 stocks, with the top 10 accounting for over 60% of the total. Major holdings include Alibaba (10.99%), Tencent (9.9%), Meituan (9.06%), JD.com (7.16%), Pinduoduo (6.27%), along with Baidu, Bilibili, Kuaishou, and other internet platforms. For investors bullish on Chinese tech prospects, KWEB is an important reference.

Hang Seng China 50 Index (HSCEI 50)

Launched by the Hong Kong Stock Exchange, it includes the top 50 Chinese mainland companies listed in Hong Kong. Compared to the A-shares index, it contains more tech firms, better reflecting China’s emerging economic drivers, including e-commerce, electric vehicles, and short videos.

Hong Kong 50 Index (HK50)

If the Hang Seng China 50 represents Chinese state-owned enterprises in Hong Kong, the Hong Kong 50 better reflects Hong Kong’s local economy. For investors optimistic about Hong Kong’s economy, this index is worth paying attention to.

Channels and Rules for Investing in A-shares, Hong Kong, and US Stocks

Trading Channels Comparison

Taiwan Brokers - Custodial Agency Channels

Advantages: Convenient, no need to open overseas accounts, can trade through local Taiwanese brokers. Disadvantages: Higher fees (usually 0.3%–1%, with a $10–$40 minimum fee); trading options limited by Taiwan’s regulations; only stocks available.

Overseas Brokerage Channels

Advantages: Lower commissions; more trading instruments; real-time quotes. Disadvantages: Requires international remittance, which can be costly and time-consuming; needs currency exchange separately.

CFD Margin Trading Platforms

Advantages: Low or no commissions; diverse trading tools; long and short positions; flexible leverage. Disadvantages: Does not involve direct stock ownership; cannot participate in shareholder meetings.

Notes on Investing in A-shares

Investing in A-shares is not accessible to everyone and has limits. Due to RMB exchange controls (Taiwan’s daily limit is RMB 20,000), purchases are generally made through Shanghai-Hong Kong or Shenzhen-Hong Kong Connect, both of which have daily capital flow limits.

The minimum trading unit is one lot (100 shares). For example, buying a stock priced at RMB 500 per share costs RMB 50,000 per lot.

Trading hours are 9:30–12:00 in the morning and 13:00–16:00 in the afternoon (with a one-hour lunch break). Similar to Taiwan stocks, A-shares have a 10% daily price fluctuation limit.

Notes on Investing in Hong Kong Stocks

You can trade Hong Kong-listed stocks directly in HKD, and Taiwan has no currency exchange limits for HKD. Some platforms allow trading in TWD or USD, with currency conversion handled by the broker.

The minimum trading unit is also one lot, but the number of shares per lot varies by company, sometimes 100 shares, sometimes 1000 shares, so special attention is needed.

Hong Kong stocks have no daily price limit.

Notes on Investing in US Stocks

You can trade US stocks directly in USD, and Taiwan has no currency exchange limits for USD. US stocks are traded per share, making small investments easier, but be aware of minimum commission charges.

US stock trading hours are continuous without a midday break, with variations due to US daylight saving time:

• During Daylight Saving Time: 9:30 PM–4:00 AM Taiwan time
• During Standard Time: 10:30 PM–5:00 AM Taiwan time

Cost Considerations and Best Practices for Investing in A-shares

Considering the custodian fees (minimum $10–$40), small investors may find A-shares not cost-effective. It’s advisable to open accounts with overseas brokers or use CFD platforms to reduce trading costs.

Regardless of the channel chosen, investors should thoroughly understand each market’s trading rules, hours, currency requirements, and select the most suitable tools based on their funds and risk tolerance.

Conclusion

Investing in A-shares requires understanding China’s stock market’s unique features: three exchanges, RMB denomination, and policy sensitivity. Meanwhile, Chinese concept stocks listed in Hong Kong and the US often perform better due to liquidity, advanced valuation systems, and higher transparency.

Whether pursuing steady index investing or selecting high-quality leading companies, China’s stock market offers abundant opportunities. The key is to choose appropriate channels and trading tools based on your individual circumstances.