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The Chinese stock market is hotting up… Here's how you can get a piece of the action

by , 18 August 2014

Since March, the Chinese stock market is up 23%. If history is anything to go by, this could be the start of a much bigger move upwards.

This comes as shares in China have been stuck in a bear market for the past few years.

So why is the Chinese stock market looking ripe for investment? And how can you invest?

Read on to find out…


Chinese stocks are up over 20% since March


It makes good investment sense to wait for an uptrend to establish before buying in. After all, shares and stock markets can always fall. Buying once an uptrend is in place lowers your risk.

And the good news is, even though Chinese stocks are up over 20% in just a few months, there’s still room for a lot more upside.

China is currently one of the cheapest stocks markets in the world, Brett Eversole in Daily Wealth explains. Have a look at the table below:


Table of stock market performances


You can see how the index in China (which represents the largest companies listed in Hong Kong) is looking against other major stock markets.

China is trading at a big discount to the others: More than a 50% discount to the States, Europe and Japan. It also pays a better dividend.

And if you compare the market to the last two times the Chinese market did well, it’s still cheaper now. This suggests there’s a lot of upside left to the move.

For instance in June 2005. The Hang Seng China Enterprise Index was trading on a PE of 10. It went on to bank 333% gains. In October 2008, it was trading on a PE of 8 and went on to soar over 132% in a year.


How to invest in China


Of course, at this stage it’s a little too early to know if there’s a sustained bull trend on the go. But it does look like Chinese stocks are breaking higher and they’ve very cheap.

From South Africa, one way you can invest in the Chinese stock market is to buy the Deutsche Bank MSCI China TR Index ETN. This exchange traded note gives you exposure to the biggest companies on the Chinese market.

Speak to your stockbroker if you’re interested investing in this.

So there you have it, how to play the Chinese stock market.

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The Chinese stock market is hotting up… Here's how you can get a piece of the action
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