I regularly get asked about how to invest in the Chinese economic growth story. A recent topic of interest has been whether British investors could profit from China’s Singles’ Day on November 11 (or 11.11) each year. The day became commercialised after 2009 when Alibaba, the Chinese conglomerate, started selling deeply discounted merchandise on its e-commerce platform for 24 hours. This time, the group set a new sales record.
Many other Chinese retailers also offer sales during Singles’ Day, which brings us back to how to invest in one of the largest e-commerce markets globally.
Investing in Chinese shares
Although China’s economy may slow down in the near future, its GDP is still expanding at an average annual rate of 6% minimum, i.e., faster than almost any other major economy in the world.
One way to increase your portfolio’s exposure to China would be to invest directly in high-quality Chinese shares. You can check with your UK-based brokerage firm if its platform lets you buy Chinese stocks.
Also, as part of the governmental level UK-China Economic and Financial Dialogue, in June, the two countries launched the London-Shanghai Stock Connect.
Companies listed in either country are now able to sell shares through dual listings on the Shanghai and London Stock Exchanges (LSE).
Huatai Securities, the technology-enabled securities group in China, became the first company to be listed in London. Now British investors can trade Global Depositary Receipts for the group. More Chinese companies are expected to follow suit.
British companies with China exposure
But there is another way to play the trend. About 20% of the China’s retail purchases are made online. In recent years, UK-based retailers, including Marks & Spencer, Dyson, Topshop, and Waitrose have managed to participate quite successfully in the Chinese e-tail experience, not only on Singles’ Day, but also throughout the year.
Most of these brands sell through Royal Mail Group‘s e-commerce shop on Alibaba-owned Tmall, the largest marketplace in China. Royal Mail buys a British company’s “products at an agreed price in sterling, which covers logistics, duties, marketplace commission fees, translations and product listings, customer services and more”.
It is no secret that there is a strong appetite for British goods in China. Going forward, I expect more British companies to increase their online presence in this growth market.
Another company to consider would be HSBC Holdings whose roots are deeply in China. As a global bank, about three-quarters of the group’s profit comes from mostly corporate clients in Asia. The bank’s forward P/E ratio is 10.6 and its dividend yield stands at almost 6.7%. It pays dividends four times a year and the next ex-dividend date is expected in February 2020.
Therefore, as you review your portfolio holdings, you may want to pay attention to UK businesses that are working to reach more Chinese consumers.
Other possibilities for investing in China
If you are new to investing or do not have the time to select individual companies in China, the world’s second largest economy, then exchange-traded funds (ETFs) or tracker funds could be the way forward.
There are several China ETFs listed on the London Stock Exchange, such as the HSBC MSCI China A Inclusion UCITS ETF or Franklin FTSE China UCITS ETF. LSE has a comprehensive online guide titled A guide to China ETFs that provides further information.
