How to get to the Chinese stock market? - The Chinese stock market is too big to ignore!

Despite the euphoric rise of global stock markets, the Chinese stock market has shown the opposite. The reason for this is the Chinese government's display of power over the country's major technology companies (Alibaba, Didi, Tencent, etc.), which has been nicknamed the "tech crackdown. "

Since this incident, major technology stocks have fallen by 40% from their current year's highs and the technology sector index Hang Seng China's technology index has fallen by about 50%, wrote Meelis Maasik, a senior specialist at Swedbank Markets.

The S&P 500 ETF is the main choice for investors looking to invest in the top US and global companies. But how do you invest in the world's second-largest economy, China? For many investors, China is a completely new market, so we will briefly introduce the specifics of Chinese stock exchanges and how to invest in them.

China is being divided into a fast-growing market. If you take a closer look at China's share of the total emerging markets index, for example, the MSCI Emerging Markets Index has the largest share in China, reaching 30%. Taiwan is followed by 15% and South Korea by 13%.

Chinese shares are listed on various stock exchanges

Nowadays, it is quite common for companies to list themselves first on the domestic stock exchange and later on the world stock exchanges. In the case of China, it is even more common for some companies not to list themselves in the local Chinese market, but in foreign markets such as the USA. In addition, it is still difficult for some stock exchanges in China to invest in foreign currency.

There are two stock exchanges in mainland China: Shanghai and Shenzhen. The Shanghai Stock Exchange was established in 1990 and consists mainly of shares of large companies. Small and medium-sized technology companies have accumulated on the Shenzhen Stock Exchange.

Foreign investors have restrictions on access to these exchanges. The Hong Kong Stock Exchange, on the other hand, is more liberal and free from Beijing's capital control requirements.

China A-Shares - Includes shares listed on the Shanghai and Shenzhen stock exchanges. It is difficult for foreign investors to access them.

Chinese H Shares - Includes Chinese companies listed in Hong Kong. It often includes shares listed on China's main stock exchange.

China ADR - includes companies listed on the New York Stock Exchange or the Nasdaq Stock Exchange.

Which Chinese ETF to choose?

Before each investment, the investor should do a little preliminary work and look at what a particular instrument contains. Particular care must be taken when investing in Chinese ETFs, as some ETFs only include companies listed on mainland Chinese stock exchanges and do not include stocks that are listed on foreign markets and are also well-known brands.

For example, the CSI 300 index includes only shares in mainland China, excluding major names such as Alibaba and Tencent.

There are some alternatives to ETFs in order of asset size. Of course, there are far more options for ETFs investing in China.