China has grown by leaps and bounds over the last few decades. Its annual gross domestic product (GDP) took off in the 1990s after economic reform and accelerated exponentially in the early 2000s when China joined the World Trade Organization. Here is the GDP of China and the U.S. — the world’s two largest economic superpowers — over the past 60 years.
Notably, the gap between two titans is becoming smaller as China’s GDP reached US$18 trillion in 2021. As forecasted by analysts, China’s GDP is projected to overtake America’s in the 2030s, a decade from now. However, in terms of GDP per capita, the U.S. (US$70,249) is still way above China (US$12,556). There are still many investment opportunities to bank on the China’s continued development as its annual GDP is still estimated to grow at mid-single digits until 2030.
First of all, the Hong Kong Exchange (HKEX) is home to many financial services and utility companies as well as property counters that are steady dividend payers. In the past two decades, the listing of China technology stocks like Alibaba on the HKEX has also garnered more attention from global investors. Increasingly, Chinese technology companies like Baidu want to list closer to home and opt for secondary listings in Hong Kong amid the China-U.S. trade war. The HKEX is a good proxy as these Chinese companies can still retain their exposure to international investors. In short, the HKEX is great for dividend and growth investors to diversify their portfolio.
On the mainland stock exchanges, there are a number of new potential investments including baijiu stocks like Kweichow Moutai. Electric vehicles and battery makers are also on the rise; Contemporary Amperex Technology Co. Limited is listed on the Shenzhen Stock Exchange and is the largest electric vehicle battery maker in the world.
Hong Kong Shares, H-shares, A-shares, and B-shares
Here are some terms to know before you invest in Hong Kong/China stocks.
|Stock exchange||Currency||Place of Incorporation|
|Hong Kong shares||Hong Kong||HKD||Varied|
|H-shares||Hong Kong||HKD||Mainland China|
|B-shares||Shanghai/Shenzhen||USD (Shanghai) or HKD (Shenzhen)||Mainland China|
A-shares were previously only available for purchase by Chinese residents, while B-shares used to target solely foreign investors. The restrictions were lifted in the 2000s to foreign institutional investors and subsequently to retail investors in the 2010s via the Shenzhen-Hong Kong and Shanghai-Hong Kong Stock Connect. Foreign investors are now allowed to trade A-shares and while mainland China citizens can trade B-shares. There are only about 100 B-shares, so they are only explained here but not discussed in detail in the rest of this article. On the other hand, certain counters are dual-listed as both ‘H-shares and A-shares’ or ‘A-shares and B-shares’.
Sometimes you will come across P chips and red chips in the news. Basically, they both refer to Chinese companies that incorporate outside of mainland China (e.g., Hong Kong, Cayman Islands) but are listed in Hong Kong. The difference is that the former is owned by private parties while the latter are state owned.
How to buy China shares in Singapore
Capital gains and dividends from Hong Kong stocks are not taxed. However, there is a 10% withholding tax on dividends distributed by A and H-shares.
The board lot size is determined by share issuers in the Hong Kong Stock Exchange. (For example, the lot size of Hong Kong-listed Tencent Group is 100 shares, while AIA Group Limited chooses to have a lot size of 200 shares.) The board lot size is standardised at 100 shares for the mainland China markets.
Brokers that provide trading of odd lots or fractional shares for the Hong Kong stock market can also come in handy. I have compiled a list of brokerages in Singapore that offer investors access to both Hong Kong and mainland China stock markets (at least one of Shanghai or Shenzhen Stock Exchanges).
|Brokerage||Min. fees||Trading commissions||Custodian fees|
|CGS-CIMB Securities||HKD88||0.25%||No custodian fees|
|FSMOne||HKD50||0.08%||No custodian fees|
|Interactive Brokers||HKD18||0.08%||No custodian fees|
|Lim & Tan Securities||HKD100||0.25%||S$2 per counter per month*|
|RMB88 (Shanghai-Hong Kong Stock Connect A shares only)||0.25%|
|Maybank Kim Eng Securities||HKD100||0.25%||S$2 per counter per month*|
|RMB80 (online order for Shanghai-Hong Kong Stock Connect A shares only)||0.25%|
|moomoo||HKD18||0.03%||No custodian fees|
|OCBC Securities||HKD150||0.15%||S$2 per counter per month*|
|RMB80 (online order for Shanghai-Hong Kong Stock Connect A shares only)||0.15%|
|Phillip Nova||HKD28||0.08%||No custodian fees|
|Philip Securities||HKD100||0.25%||S$2.14 per counter per month*|
|ProsperUs||HKD40||0.15%||No custodian fees|
|Saxo Markets||HKD90||0.15%||0.12% p.a. of stockholding balance, custodian fee calculated daily using the end of day values and charged on a monthly basis|
|Tiger Brokers||HKD15||0.06%||No custodian fees|
|UOB Kay Hian||HKD75||0.12%||S$2 per counter per month*|
Last updated 31 January 2023. Only brokers that provide online orders for trading both Hong Kong and China A-shares are included in the table. The figures shown above are charges of online orders based on cash upfront accounts. *Custodian fees are capped at S$150 per quarter (S$200 for OCBC Securities) or waived if at least 2 transactions are performed monthly or 6 transactions quarterly.
Other trading fees such as transaction levy and stamp duty may also apply on top of the trading commission. Please take note that miscellaneous fees may be incurred for corporate services such as share transfer charges.
The custodian fees charged by traditional brokers are quite hefty. If you own 10 stocks and don’t transact often enough to qualify for the fee waiver, the charges will amount to about S$20 a month or S$240 a year. Therefore, brokers that keep their trading commissions low and don’t charge any custodian fees like FSMOne, Interactive Brokers, ProsperUs ,moomoo, and Tiger Brokers stand out.
FSMOne is owned by iFast Corporation. The trading commission charged by FSMOne is decent compared to a number of traditional brokers although not as cheap as some new entrants. The trading platform is rather user-friendly and suitable for new investors. I am an existing FSMOne user and find the customer service reliable, helpful, and prompt. The chatbot function is useful; you can just post your questions there, and answers/suggestions will be given almost instantly. FSMOne also offers investors access to the U.S., Singapore and Malaysia markets.
moomoo is wholly owned by Futu Holdings Ltd, a Nasdaq-listed company backed by Tencent. moomoo offers one of the most competitive trading fees for Hong Kong and China A-shares. One advantage of moomoo is that it allows investors to trade odd lots on the Hong Kong stock market. Besides Hong Kong and China, moomoo also provides investors with low-cost access to the U.S. and Singapore stock markets. To entice new users to sign up, moomoo offers several free gifts and promotions including free shares and live market data.
Tiger Brokers is also listed on the Nasdaq and backed by a number of institutional shareholders such as Interactive Brokers and Xiaomi. The brokerage has competitive trading commissions and is a good platform for investors who want to trade securities across the U.S., Singapore, and Australia stock markets. Similar to moomoo, it offers freebies and gifts for new users to sign up. Tiger Brokers doesn’t offer odd lot trading but does allow users to close their odd lot positions.
ProsperUs was launched by CGS-CIMB Securities in late 2020 to with young investors in mind. The brokerage provides investors with access to over 20 exchanges across 10 markets ranging from the U.K. and Europe to the U.S. and Australia. Its trading commission is priced similarly to FSMOne.
Interactive Brokers is headquartered in the U.S. and listed on the Nasdaq. It offers a comprehensive range of investment products including stocks, options, and futures from stock exchanges pretty much across North America, Europe, and the Asia Pacific. Interactive Brokers provides the widest market reach and the greatest number of investment products at very affordable rates compared to other contenders. Its trading commission is also one of the lowest in the industry currently. The user interface takes a little getting used to, but if you intend to invest in multiple markets other than China, Hong Kong, Singapore, and the U.S., all you need is probably a single Interactive Brokers brokerage account.
The fifth perspective
China’s rise is here to stay as it gradually extends it soft power, and continues to export its products and services to the rest of the world. Much of our daily lives will increasingly be filled with the likes of TikTok, Xiaomi, Taobao, and so on. That will be a boon for Chinese companies and stock markets. If you plan to jump on China’s economic growth, you can consider opening a brokerage account with the brokerages listed above.