China is among the fastest growing economies in the world, and its Stock Market is living proof of it.
With growth of $6.17 trillion in a period of 12 months until June 2020, it has surpassed the entire valuation of the Japanese Stock Market, which stood at $5 trillion back then.
In this article, we will look at why you should invest in these Chinese markets and how you can do so without any help from others. So, let’s roll it.
Why Should You Invest In Chinese Markets?
It is very much prominent that China has been on a mission to multiply its Economy, and the Hang Seng Index(China’s primary Stock Market Indices) is clearly showing that.
Just like any other growing economy, it has constantly been on an upright since its inception.
Let’s look at some of the top reasons why you should prefer having a portfolio filled with Chinese stocks.
1. China’s Exponential Growth
China has become a superpower for the whole world in no time, and the primary reason for this is its massive labor power and technological upgradation.
Almost every company in the world is coming to China for its support and tech; thus, it is continuously generating foreign currency.
The population somehow favors China, which is the opposite of India. The cheap labor and the tech-savvy approach of the Chinese citizens are indeed a catalyst in its Economic growth.
2. Rising Foreign Trade
The Foreign Trade in China, despite the Corovirus outbreak, is quite impressive. The country witnessed a jump of 9.4% in its foreign trade goods and reached an all-time high of 19.8 trillion Yuan.
This growth has been reflected even in the Stock Markets as companies continue to expand their productions.
3. Controlled Inflation
With the world going through a phase of rapid inflation and a fear of global recession, China has been magnificent in controlling this financial havoc. The country has managed to stabilize consumer inflation with only a rise of 2.5% year-on-year, which is considered quite healthy.
4. Improved Employment
The Chinese employment rate has improved significantly since the post-covid era. According to a survey, the urban unemployment rate went down to 5.5% from 5.9% in June, which is a major sign of growth and improvement.
How To Invest In the Chinese Stock Market
Enough of the background story. Let us now dive into the complete guide to investing in the Chinese Stock Market from India.
Generally, most people used to invest in the Chinese markets through a mutual fund known as Edelweiss. Things were going fine until SEBI implemented a direct ban on these funds.
People of India cannot invest in such mutual funds that are involved in foreign investments.
This leaves us with only two options to invest in the Chinese Stock Market.
1. Investing Through US Market
The US Stock Market is the biggest among all the other markets globally. The best part about these markets is that the NASDAQ also lists multiple Chinese companies on its exchange.
So, if you want to place your bet on giant Chinese companies like Alibaba, you can do so through NASDAQ.
All you have to do is to sign up for a Demat account in the US. This is compulsory as you cannot store its stocks anywhere else without a Demat account in the US.
2. Getting An International Broker
International Brokers are meant to invest your money in the Global stock markets. You can also use them to buy the stocks of Chinese companies. All you have to do is sign up on their platform, transfer your funds and buy your ideal stocks.
You can sign up for InteractiveBrokers, and follow the above steps to buy Chinese stocks.
Currently, only these two options are available for Indians to invest in the market.
Overall, you can invest in the Chinese Stock Markets legally from India. However, there are certain factors that you must keep in mind while doing so.
Firstly, you cannot escape from your tax liabilities by investing in any other country’s market, as the Indian government keeps tracking all your foreign investments.
Secondly, China is going through a drastic bank crisis and has reported a mortgage loss of over $350 billion. This has severely affected the country’s stock exchange as it is continuously plunging in every trading session.
Writing my opinion, I would not have invested any of my wealth in such risk-averse conditions. Letting the country stabilize its economic condition from this financial massacre is better before putting my bets on it.