Red chip stocks are stocks of mainland China companies incorporated outside mainland China and listed on the Hong Kong Stocl Exchange. Red chip stock companies are based in mainland China and are directly or indirectly under the control of the Chinese ruling party. Since they are listed in Hong Kong, investors outside China can invest in them.
The phrase “red chip stock” was coined by Hong Kong economist Alex Tang in 1992. It is a play on the well known concept of blue chip stock. The color red represents China, both because the country is governed by the Communist Party of China, and because of the colors importance in traditional Chinese culture where it is associated with good fortune and expansive energy.
Examples of red chips stock
If you are interested in investing in red chips stock, a good place to start investigating can be the Hang Seng China-Affiliated Corporations Index.
Here are the 25 companies that are included in the Hang Seng China-Affiliated Corporations Index at the time of writing.
|Corporation name||Stock symbol|
|Yuexiu Property||(SEHK: 123)|
|Kunlun Energy||(SEHK: 135)|
|China Merchants Holdings (International)||(SEHK: 144)|
|China Everbright||(SEHK: 165)|
|China Everbright International||(SEHK: 257)|
|Guangdong Investment||(SEHK: 270)|
|China Resources Enterprise||(SEHK: 291)|
|Shanghai Industrial Holdings||(SEHK: 363)|
|Beijing Enterprises Water Group||(SEHK: 371)|
|Beijing Enterprises||(SEHK: 392)|
|China Overseas||(SEHK: 688)|
|China Unicom||(SEHK: 762)|
|Franshion Properties||(SEHK: 817)|
|China Resources Power||(SEHK: 836)|
|China Mobile||(SEHK: 941)|
|China Taiping Insurance||(SEHK: 966)|
|Lenovo Group||(SEHK: 992)|
|CSPC Pharmaceutical Group||(SEHK: 1093)|
|China Resources Land||(SEHK: 1109)|
|Brilliance China Auto||(SEHK: 1114)|
|China Resources Gas||(SEHK: 1193)|
|COSCO Pacific||(SEHK: 1199)|
|China Resources Cement||(SEHK: 1313)|
Information about Chinese share types
If you are interested in investing in chinese companies, it is a good idea to learn the difference bewteen the various shares. Please note that not all shares in this compliation are considered red chip shares. Generally speaking, only companies traded on the Hong Kong Stock Exchange are refered to as red chip shares.
In this context, A shares are shares in Chinese companies traded in the currency Renminbi (CNY) on the Shanghai Stock Exchange and the Shenzhen Stock Exchange in mainland China.
The Chinese government restricts foreigners from owning A-shares.
B shares (formally: Domestically Listed Foriegn Investment Shares) are shares in Chinese companies traded in foreign currencies on the Shanghai Stock Exchange and the Shenzhen Stock Exchange in mainland China. The face value of the B shares are set in Renminbi (CNY), but B shares are traded in US dollars (USD) on the Shanghai Stock Exchange and in Hong Kong dollars (HKD) on the Shenzhen Stock Exchange.
Until February 19, 2001, only foreigners were allowed to purchase B shares. Since then, the China Securities Regulatory Commission has allowed the exchange of B shares to domestic citizens via the secondary market.
H shares (formally: Hang Seng China Enterprises Index) are shares of companies that are traded on the Hong Kong Stock Exchange but incorporated in mainland China.
Many companies float their shares simultaneously on the Hong Kong Stock Exchange and on the two stock exchanges in mainland China, and it is not uncommon to see a significant price difference between H shares and A shares from the same company. A shares tend to be more pricy, since the Chinese government restricts mainland Chinese citizens in mainland China from investing abroad, and also restricts foreigners from investing in A-shares floated in mainland China.
P chip refers to companies that have their busienss operations in mainland China but are traded on the Hong Kong Stock Exchange and incorporated outside mainland China, more specifically in the Cayman Islands, British Virgin Islands or Bermuda. P chip companies have operations in mainland China and are run by private sector Chinese citizens.
S chip referes to companies that have their business in mainland China but are traded on the Singapore Stock Exchange and incorporated in Singapore, Cayman Islands, British Virgin Islands or Bermuda.
N shares are shares in companies that have their business operations in mainland China but are traded on the NYSE, NASDAQ or NYSE MKT. These companies can be incorporated inside or outside mainland China. Most of them are incorporated in Cayman Islands, British Virgin Islands or Bermuda, or in the U.S. states Delaware or Nevada.
L shares are shares in companies that have their business operations in mainland China but are traded on the London Stock Exchange. These companies are incorporated in Cayman Islands, British Virgin Islands, Bermuda or Jersey.