This is a very interesting question and being in the investment space myself I can understand your eagerness to invest in this market. The Chinese Market is a growing economy and definitely a very exciting prospect for the investors. To put my thoughts into data the entire Stock market is valued at $10 trillion by the World Federation of Exchanges.
Furthermore, according to Bloomberg the market showed an increase of $ 6.7 dollars during 12 months before June 2020. Interestingly, this is larger than the entire Stock Market of the Developed Market of Japan. Here is a look at the increased market capitalisation of the Chinese Stock Market over the last few years.
Now coming on to the main question: how can you invest in the Chinese Market. Chinese markets are very restrictive due to excessive government interference, but still there are less direct ways of investing in the market. These could be majorly categorised into 2 choices, let us look at them one by one:
1. Investing in Mutual Funds/ ETFs
The best way to invest in China is to invest in a broader market index or investing through an Exchange Traded Fund (ETF). For those of you who don’t know about ETFs, they are funds which do not track particular stocks but an entire index or market. These China based ETFs own companies such as Alibaba Group Holding Ltd., China Yangtze Power Limited, Baidu, Pinduoduo, JD.com, Inc.[dot]comand other big companies in China.
Now, there are 14 indices tracked which are tracked by ETFs. You can easily invest in these ETFs both through the Indian and the US Market. Some China based ETFs in India include the ones which track the Hang Seng on a real-time basis. Similarly, you can directly invest in the only Indian Mutual Fund to focus on Chinese Markets by Edelweiss, or other similar funds having exposure in the Asia-Pacific Region.
The US Market offers a wider variety of both funds and ETFs. There are a total of about 14 ETFs which track the Chinese Markets. You can accordingly invest in the optimal ETF as per your requirements. Some popular Chinese companies focused US listed ETFs (This is for informational purposes, and is not to provide any investment advice in any form)
2. American Depository Receipts (ADR)
This strategy cannot be used by Indian Residents but can be used by Indian NRIs residing in the US. The strategy includes buying Chinese companies traded on major US Stock Exchanges as American Depository Receipts. Buying these ADRs are simple, just put an order through your broker. Indians can also buy foreign shares this way using Indian Depository Receipts
These are the two major ways of investing in the Chinese Stock Market. Investing in ETFs is majorly the most effective and widely used strategy.
Hope this answers your query. Happy Investing.
Disclaimer:
The above communication is only for informational purposes, and is not intended as an offer or solicitation for the purchase or sale of any financial products, or as confirmation of any financial product transaction. The information provided above is general in nature and should not be considered financial, legal or tax advice.