China Stock Market Overview
This is not a statistic paper that simply list some data and bullshits, nor some amteur comments that u can see everywhere.
Here, we will provide real insights and experience. In Chinese, we called it
'Gan Huo' (干货）
Currently, there are 4067 companies listed in Shanghai and Shenzhen
(by the time of 2020-10-30)
The above pic is ranked by market cap, shows the top 20 listed companies in China. The biggest giants. Those companies mainly come from consumers, financial services, technology, and health care industries. Compared with 10 years ago, those top 20 are generally all from the traditional industry like banks and energy. So which can also show China's economy now evolving so fast.
In fact, it is the best time to invest in China. I won't elaborate here on how China's economy is robust. China has the largest market in the world, they have enough resources and market to breed giants.
We will post other articles to show more detail about those top companies. If you just invest by market cap here, you won't lose money. But we will let you know more about the style and how to analysis China market and companies.
We can see among the 21 companies, only 8 companies recorded negative returns YTD, and they all come from traditional industries like banks and oils. Other companies, we call them new economy, or sectors that strongly supported by China Government, and they recorded decent returns range from 10%~235% YTD.
So here comes the No.1 rule to invest in China:
1.Always follow government policy.
It's still a policy market, although it's highly fundamental driven now. You can still deploy a fundamental value investing approach like investing US shares. But you have to be aware the top policy that implemented or released in China in order to have a long standing winning
Chance and period.
Usually, the central government will release policy to stimulate or encourage some specific industries or sectors so that the general economy will improve. Never go against with the policy, like never go against the FED. What you should do, is find those benefit sectors, deep-dive the sectors and find the top 1 and 2 companies in the industry, and invest them.
when you invest in China, you need also to understand the investor base. Generally, the market comprised of institutional investors and retail investors. You can also divide them by fundamental value investors (like some large mutual fund in the US) and quick (hot) money.
When the shareholder is highly diversified, the share px is usually driven by hot money, then you need to watch out for the turnover ratio of the stock and quantity relative ratio.
Rule No.2 watch out for the turnover ratio of the stock and quantity relative ratio
to figure out if the company have a short-term momentum. Usually, high turnover ratio and high relative ratio means the px have large potential to go up or go down in the short-term period. We'll elaborate more in other articles.
The fundamental analysis approach is still useful in China. As foreign investor increase their position in China, they have deeply influenced the Chinese investor and their style. Usually foreign investors have a large position in biggest blue chips, which always reach to new high level. When sky is the limit, the market-style shifted.