How to analyse Chinese company share prices?

Over the last few years the Chinese stock markets have experienced a significant growth and their stock market assets have spiked the interest of many European investors. It should be said here that the Hong Kong, Shanghai and Shenzhen stock markets have become tempting with shares available from companies with some of the largest stock market capitals worldwide. But although these Chinese assets offer certain advantages they also present certain disadvantages that you should be aware of. Therefore, before speculating on these Asian assets you should be able to analyse them effectively to obtain reliable high quality signals. This is why we offer you the opportunity through this dedicated article to learn how to achieve reliable analyses of these assets and learn more about the larger Chinese companies’ and their shares.

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How to analyse Chinese company share prices?

The Chinese stock markets and their importance:

Although the Chinese stock markets are still relatively unknown to many foreign investors, they do have certain particularities that can be advantageous. The Chinese shares can be divided into different sectors with for example the H shares that were previously the only Chinese shares available to foreign investors quoted on the Hong Kong stock market, and the A shares which are quoted on the Shanghai and Shenzhen stock markets. The latter only became available to foreign investors in 2002 through the opening of the domestic stock markets. It should however be noted that although in the beginning foreign investors could only own a small percentage of these shares these market limit regulations have now become far more flexible. The Chinese domestic shares currently hold second position worldwide in terms of stock market capital with a total of nearly 7.5 trillion dollars for around 3,700 assets quoted. Of course, the Chinese stock markets still do not meet the capital of the American markets with nearly 35 trillion dollars of stock market capital however the recent internationalisation has enabled the Chinese shares to reach a high level in relatively little time.

In fact, since the opening of the domestic Chinese stock markets to foreign investors, the financial service providers have revised the composition of their world stock market indices. This is notably the case with the MSCI index that has increased the weight of the Chinese domestic shares. It should be remembered here that the MSCI is an index of reference relating to the growth of the world stock markets, and its sub-index, the MSCI Emerging Markets, has strongly increased the number of Chinese share prices included in its composition over recent years.

Nowadays, thanks to the internationalisation of the Chinese stock markets, as well as the strong economic development of this emerging market, the Chinese shares are now amongst the most sought after and popular assets with investors from all countries, notably European investors, that see them as a way to diversify their trades with shares that are more speculative in nature and therefore considered as highly promising by the analysts.


How can someone invest in Chinese shares?

As you may have noted, it is now possible for European investors to buy Chinese shares quoted on the three largest financial marketplaces of this country.

With the more traditional forms of investment it is generally easier to invest in offshore Chinese shares such as the H shares on the Hong Kong market or the Chinese ADRs in the United States. These freely available shares are quoted in HK$ and US$ on the international stock markets. However, these offshore Chinese shares do have the disadvantage of being concentrated in only a few market sectors such as telecommunications, energy, banks and IT. This is why the current investors generally prefer the onshore Chinese shares listed on the Shanghai and Shenzhen stock markets, these are the A shares. These assets offer more diversity but are not as freely accessible to foreign investors.

One of the best ways at present to speculate on Chinese assets is through the use of an online broker that offers derived assets such as CFDs, or Contracts for the Difference. These contracts actually enable you to take position on the rise or fall in the share price on the international stock markets without in fact having to buy the shares outright and holding them in your stock market portfolio. As indicated by their name, these ‘Contracts for the Difference’ are based on the difference between the price when you open the contract and the price when you close it, if you predict the closing price correctly then you will make a profit amounting to the price difference, if not then you will lose.

The online brokers are starting to diversify their range of company shares by offering an increasing number of popular large Chinese companies. Although all the Chinese companies are not yet available internationally the shares from large companies with high stock market capitals from this country can now be traded on many of the online broker platforms. It is therefore important to check if the Chinese assets you wish to trade in are available through your chosen broker.


How to analyse the movements of a Chinese company share price?

Of course, before you launch into online speculation of the major Chinese shares, it is important to remember that this type of investment, as indeed with any financial investment, requires a solid knowledge and understanding of the market and the ability to complete pertinent and precise analyses for each asset that interests you. This will in fact enable you to obtain comprehensive and reliable trading signals for a rise or fall in the share price that will indicate the position you should take.

Here, as with the shares on the European or international stock markets, it is particularly strongly recommended to use both a fundamental and technical analysis. Here we will explain what exactly these are and how they complement each other.

  • A fundamental analysis relies on the study of exterior factors that could exert a significant influence on the stock market asset price or rate. These factors are generally related to events, publications and announcements that will have a direct or indirect impact on the growth abilities of the company concerned. Some of these factors do not change according to the asset such as financial results or publications, the plans relating to strategic development, partnerships, alliances, acquisitions or mergers. But other factors can be particular to the company concerned depending on its activity sector, its particularities or certain specific events pertaining to it. To complete a comprehensive fundamental analysis for a Chinese company or share price you will therefore need to know the factors that could influence the economic health and prospects of the company concerned.
  • The second type of analysis that you need to master before investing in Chinese company shares is the technical analysis. Contrary to the fundamental analysis, this type of analysis can be automated as it depends on a mathematical model that analyses the stock market rate of the asset concerned. For a technical analysis you can benefit from the stock market charts available online from your broker that are generally the most practical and innovative for this type of operation. These charts can be personalised to your preferences so that you can modify the timeline represented in accordance with your particular investment strategy (short, medium or long term) as well as displaying different trend or volatility indicators. You will need to be able to correctly interpret these different indicators to be able to extract reliable buy or sell signals.

Using only one of these types of analysis is not advisable as this can give rise to false trading signals. You should in fact compare the signals obtained through these analyses to confirm or modify the signals you obtain. It should also be remembered here that even with both analyses this does not guarantee 100% that you will correctly understand or anticipate future movements in Chinese share prices and you should be aware of the heightened risk related to trading in these shares compared with those on other markets.


Know the major Chinese companies before trading in their shares:

You have surely now understood the major difficulty when trading in Chinese company shares which is related to the fact that it is necessary to be familiar with the companies that issue these shares. Unlike the major European and American companies, information on the Chinese companies quoted on the stock markets is less freely available and can be hard to find.

This is the reason why we have dedicated a part of our website to these assets so you can quickly find all the information you need for your analyses of the major Chinese company share prices.

We offer you the opportunity to read articles dedicated to each major asset on the Chinese markets and gather useful and pertinent information such as:

  • The data you should take into consideration when you undertake a fundamental analysis of these assets such as publications, events and announcements that would probably influence their growth and stock market prices.
  • A detailed presentation of the Chinese companies quoted with details of their activities and the distribution of their turnover according to the activity sectors where they operate or the geographical areas.
  • An overall presentation of the principal competitors of these companies to assist you in the preparation of your segmental analyses of each asset.
  • Some examples of strategic partnerships implemented by these companies with the aim of boosting their growth or increasing profitability.
  • The advantages and disadvantages of each asset, this means the strengths and weaknesses of each company quoted on the Chinese stock markets. These factors will enable you to understand how each company may fare against the competition and future challenges or threats that could negatively influence their share price.
  • Of course, for each of these major Chinese share prices concerned we will provide you with pertinent stock market facts and figures such as the total stock market capital of each, the number of shares in circulation on the markets, the principal markets and indices where each is quoted, and the activity sectors.
  • Finally, we respond precisely to the main questions generally asked by investors relating to these assets through a FAQ, or Frequently Asked Questions section.

Finally, all the information you learn here through these pages dedicated to the major Chinese companies will provide you with the basics for your analyses with the knowledge and information that you will require. Then you simply have to put them into practise by completing your analyses of each share price before launching into trading.

Frequently Asked Questions

What are the major Chinese stock market indices?

The Chinese shares that you are able to trade online are generally those quoted n the major stock market indices in these markets. Among the principal Chinese stock market indices we note the Shanghai Composite for the Shanghai stock market and the Shenzhen Composite for the Shenzhen stock market as well as the Hong Kong Heng Seng Index for the Hong Kong financial marketplace.

In which currency should you trade in Chinese company shares?

When investing in Chinese company shares through specific contracts or investment tools such as CFDs, you will not have to concern yourself with currency exchange rates. In fact, the prices of the company shares that you wish to invest in will be quoted in your own currency, either in Euros, pounds sterling or American Dollars. It is therefore not necessary to obtain Chinese currency to complete this type of investment.

Which Chinese companies have the best potential?

To determine which Chinese companies have the best potential in terms of performance, you will above all need to carefully prepare your investment strategy. In fact, the classification of these Chinese companies will vary according to whether you wish to invest over the long, medium or short term as well as your investor profile and in particular the risk level you are prepared to take to potentially increase your level of profitability.

77% of retail CFD accounts lose money. You should consider whether you can afford to take the high risk of losing your money. This is an advert for trading CFDs on Plus500