How to make money on the stocks and bonds of Chinese companies

Another important milestone was the inclusion of June 1, 2018 in the portfolio stock index MSCI Emerging Markets more than 200 shares of the largest companies traded on the mainland markets and are related to the category A. it May seem that this step is of a purely technical nature, but in fact its importance cannot be overstated. It shows that China is gradually becoming an integral part of the global capital markets. In addition, institutional investors are adjusting their index-linked portfolios, can facilitate the flow of Chinese stock of foreign investment of more than $1.5 trillion in the next 5-10 years.

It is clear that investors, whether European hedge funds, pension funds from Australia or Russian businessmen, it is necessary to look closely at the Chinese capital markets offers probably the unique investment opportunity that appears very rarely.

Only one size of this market is very impressive. China’s stock market — the second largest in the world, in 2017 the cost will be 3,000 And in Shanghai, where the most traded blue chip, the stock exchange in Shenzhen, focused on IT companies, amounted to about $8.7 trillion. The domestic debt market of China’s size ranks third in the world.

Как заработать на акциях и облигациях китайских компаний

Shadow giants

China’s economy is now fundamentally different from what it was 20 or 30 years ago. Range of opportunities for investment has become far more wide and varied. Flexible and innovation-oriented development private companies have increasingly come to the fore, eclipsing a giant state-owned enterprises, and this sector provides more than 60% of economic growth in China and 90% of new jobs in the cities.

In the field of high technologies and innovations the implementation of such state programs as “Made in China 2025”, stimulated a spectacular growth of e-Commerce, a transition to advanced production technology and the active growth of the fleet of electric vehicles. China’s drive to become a world leader in the field of artificial intelligence has led to the emergence of the company’s image recognition SenseTime, which recently became the most expensive AI startups in the world with the estimation of capitalization more than $3 billion.

In the consumer market, rising incomes provide opportunities for investment in almost everything from sports apparel to travel services and traditional drink Bizzy.

Chinese companies actively use the opportunities offered by the initiative “One belt and one road” for decades the strategy of strengthening the economic ties of China with the rest of the world. Among the beneficiaries of a little-known manufacturer from Shenzhen Transsion Holdings, whose innovative approaches have become the most popular brand of mobile phones in Africa.

Actions to stimulate such growth, which would not only bring economic benefits, but did not damage the environment, raise the crest of a wave of companies in the sector of sustainable development. Example: the largest manufacturer of wind turbines in China and Goldwind, which are publicly traded in Shenzhen and started the business 20 years ago, today is the third largest producer of renewables in the world after the Danish Vestas and Spanish Gamesa Siemens.

A matter of trust

Sometimes it may seem that investing in China — not for the faint of heart. Just look at the UPS and downs of the stock categories And in 2015. However, the provider MSCI did not reduce the weight of these securities in their indexes. And additionally plans to include in its index of companies that will take not only credit quality but also on environmental, social and governance criteria.

The same applies to bonds of Chinese issuers. Bloomberg, who announced in March that from April 2019 it plans to add yuan-denominated bonds to the Chinese state and private-owned banks, in its Global Aggregate Index, called for additional steps to improve the situation, to “boost investor confidence and facilitate access to markets”.

The inflow of funds from international markets will allow us to find alternative sources of capital for development, so necessary to private enterprises on the background of the ongoing government steps to reduce the level of over-indebtedness of companies, threatening economic stability. In the coming months and years we can expect further liberalization of the Chinese market. Beijing financial reforms, opening of capital market and the growing popularity of the yuan on the global level are a prerequisite for broad economic restructuring, which headed the country’s authorities.