Trading the China Blue Chip Stocks

Trading the China Blue Chip Stocks

Trading the China Blue Chip Stocks

The SSE equity market is the Main Board Market of China which is also widely regarded as the Blue-chip Market of China. It has attracted a number of industry giants with high growth rate, stable performance and solid profitability. With 20 years’ of development, the SSE’s multi-tiered blue chip market includes 3 tiers, namely original blue chips, emerging blue chips and potential blue chips:

·The Original Blue-chips are constituent stocks of the SSE180 Index with a total market-cap of RMB 12 trillion. Most of these companies are top players in finance, traditional industry, energy and other backbone sectors of the national economy. These stocks are also featured by good liquidity, stable performance and high dividend payout ratio. The statistics of 2011 demonstrates that these 180 companies accounted for around 20% in the number of listed companies, but 70% in market-cap and 89% in net profit of the total SSE market.

·The Emerging Blue-chips are constituent stocks of the SSE380 Index, consisting of selected 380 mid-cap companies with sound growth, sustainable profitability and comparably higher market valuation. Most of them are either excellent companies imposing economical influence within their regions or flagships within their sub-industry. In addition, a considerable portion of these companies are operating in energy saving and environmental protection, new generation of information technology, pharmaceuticals, biotechnology, high-end equipment manufacturing, new energy, new materials, and consumer services industries..

·The Potential Blue-chips are constituent stocks of the SSE580 which is yet to be launched. Currently, over 300 companies are covered, with the high potential to become tomorrow’s Emerging Blue-chips or Original Blue-chips. According to market statistics, some of these companies show even faster trading velocity, higher growth potential and more volatile P/E ratio than the other two bluechips despite its smaller market cap.
The blue-chip market structure not only provides a wider underlying stock range for investors’ portfolios, but also draws a Blue-chip Company roadmap to guide a listed company to develop from the phase of ‘potential’ to ’emerging’, and eventually ‘original’.

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Shayne Heffernan Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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