Red Chip Stocks: A Guide for International Investors

The term red chip stock refers to a stock that is from a company that is located in China. Here are the basics of what a red chip stock is and how it can impact you as an investor.

Red Chip Stock

This type of stock is referred to as red chip in reference to the red color of the Chinese flag. This is a type of stock that is available for individuals that are located outside of China to invest in. If you are a Chinese citizen, you will be investing in A-shares of the same companies instead of the red chip stocks. Companies that issue red chip stocks have to go by the same rules as companies that trade on the Hong Kong Stock exchange. Typically, the A-shares of a company trade at a higher price than the red chip stocks of that same company. 

Potential

Investing in red chip stocks is a popular activity for investors that are located outside of China. The Chinese market is rapidly growing and there are multiple opportunities to get involved in companies that are still relatively young in the growth stage. By investing in these Chinese companies, you could potentially realize a huge return on your investment over an extended period of time.