There are risks (more on this below) that investing in foreign countries brings like currency risk, regulatory and transparency issues, volatility, and local-country risks like corruption, war, and natural disasters. Its leading social network Weixin, or WeChat as it's branded internationally, finished 2018 with nearly 1.1 billion monthly active users. However, they don't face the same reporting requirements from the Securities and Exchange Commission that directly listed companies do, so it may be more difficult to get information on them. Along with Alibaba, Tencent is China's other dominant tech giant, and together the two companies have a role in nearly every corner of China's tech industry. JD has also invested in technology like drone delivery and robotics to automate its warehouses, helping to strengthen its delivery leadership. A number of U.S. companies are moving manufacturing out of China to places like Vietnam, India, and Mexico. An error has occurred, please try again later. Its marketplace model itself creates competitive advantages through network effects and has generated high profit margins for the company. Growth in its biggest segment, online games, has been slower lately due to a temporary halt in new game approvals. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. There's one reason above all others that makes China so appealing to investors: growth. Outside of China, JD has also teamed up with Alphabet, which invested $550 million in JD and partnered with the e-commerce company to combine JD's supply chain and logistics expertise with Google's technology prowess. In its emerging cloud business, revenue more than doubled to $1.3 billion, as cloud remains a valuable long-term opportunity. In its other business, which is primarily made up of mobile payments and cloud computing, revenue jumped 80% to $11.4 billion, driven by an increasing take rate from commercial transactions and an increase in other fees as the number of active users increased significantly from the previous year. While biggest doesn't mean best in investing, looking at the biggest China stocks that trade on American exchanges will give investors a good sense of the flavor and variety of investments that they can make in China. The size of those apps has given the company a very sticky and valuable platform from which to add on a wide variety of money-making components, including advertising, mobile gaming, video streaming, and mobile payments. Trading hours are limited. The Shenzhen offered a poetic explanation: “The two links between the mainland and Hong Kong bourses will be flowing rivers that assemble the capital, technologies, information, wisdom, and culture of the mainland, Hong Kong, and global markets so that they will further benefit the economic development of the mainland, Hong Kong, and the world.”. JD has forged a number of partnerships with other Chinese companies and global retailers. (BABA) is a Level 3 ADR. ADR's essentially make it easy for foreign companies to list on U.S. exchanges and make their shares available to American investors. Its Tmall online marketplace provides a home for a number of high-end global brands like Nike, Estee Lauder, and H&M to sell their goods. When you check out an ADR, find out whether it is a Level 1, 2, or 3. The company delivers the majority of customer orders itself and offers same-day and next-day delivery to 2,146 counties and districts in China. Investing in foreign companies isn't always easy. Of all the Chinese stocks out there, Alibaba may be the best known to American investors, and for good reason. The exchanges have imposed restrictions, and settling trades in another currency is a challenge, too. On the flip side, if the Chinese market ever opens up to allow companies like Alphabet, Facebook, and Netflix to operate there, Chinese companies now doing well could suffer from the competition. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. The largest in market capitalization is Finally, the risk of fraud in Chinese stocks is much lower than it was, but investors should be aware that Chinese companies are subject to different reporting requirements regarding their financial statements. For instance, the communist government wields tremendous power, and can easily crackdown at companies at will if they run afoul of China's strict content rules. Market cap is the total market value of a company's outstanding shares of stock. Returns as of 10/29/2020. For instance, Chinese stocks tend to get attacked by short-sellers more frequently than those of American companies. Stock Advisor launched in February of 2002. In the history of the world, no economy has made as big of a leap in such a short time as China has in the last generation. Finally, Alibaba owns a third of Ant Financial, the parent of Alipay, the payment processing service that has a part in 70% of the company's e-commerce transactions and had more than 700 million users in China as of September 2018 and 900 million globally. An American depositary receipt, or ADR, is a stock that trades on a U.S. exchange but represents shares in a foreign corporation. We've detected you are on Internet Explorer. Level 2 ADRs must comply with a number of SEC reporting requirements, but cannot be used to raise capital. Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. This probably makes sense only for a large position, as you have to pay a $500 conversion fee in addition to per-share transfer fees. According to HSBC, China is set to overtake the U.S. by 2030 to become the No. It formed a strategic partnership with Tencent, which makes JD Tencent's preferred partner for physical goods e-commerce and allows JD to use Tencent's apps to help its users' shopping experience. ... Shenzhen Stock Exchange is recognized for its success in teaching new and developing traders how to profitably trade equities, options, futures and develop unique algorithms. When looking for individual China stocks, investors will want to use many of the same tools and metrics they would with any other company to evaluate potential stock purchases. For instance, buying stocks listed on Chinese exchanges like the Shanghai, Shenzhen, and Hong Kong stock exchanges may require you to open a brokerage account with a Chinese firm, or you can check if your U.S. brokerage will allow it. Alibaba has also built an impressive network of complementary businesses and competitive advantages. You can also trade Hang Seng China Enterprises Index options and futures. Though JD has its own marketplace, the majority of the company's business comes from direct online sales. That drove organic revenue growth, which excludes the impact of acquisitions, of 39% to $56.2 billion. These are funds that hold a group of stocks and trade as a stock would, making it easy to move in and out of. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. 1 economy by gross domestic product. Additionally, Tencent holds a massive portfolio with investments in more than 700 companies, many of which are expected to go public soon. Though Chinese stocks have recovered much of those losses in 2019, as the index is up 18% through mid-July, the same risks remain. Last year, the company posted an adjusted net income of $13.9 billion on $56.2 billion in revenue. This copy is for your personal, non-commercial use only. Level 1 ADRs typically trade only on the over-the-counter market, and there is no information about the issuer available on the SEC’s information system. This category has been exclusive to Chinese investors. You will have to deal with the foreign taxes, however, which can cost you some time. Additionally, strong partnerships with brands that sell on its marketplace should protect its value position, and ensure strong profit margins. For instance, buying stocks listed on Chinese exchanges like the Shanghai, Shenzhen, and Hong Kong stock exchanges may require you to open a brokerage account with a … Purchases are limited to lots of 100 shares, although the exchanges allow sales in odd lots. Interactive Brokers has allowed its customers to trade on the Shanghai exchange since it opened in 2014, and now allows access to Shenzhen, as well. In fiscal 2019, which ended on March 31, Alibaba's China retail marketplaces, Tmall and Taobao saw gross merchandise volume (GMV), or the total value of goods sold on the platforms, rise 19% to $853 billion.

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