There is some speculation that Coca-Cola, General Electric, and Wal-Mart are seeking to raise capital by offering stock… in China. The companies have not responded to these rumors, but China seems open to allowing western companies to participate in the country’s stock exchanges once trading resumes.
If American companies want to be on the Shanghai Stock Exchange, American investors might want to be there, too. The way things stand now, it is difficult for foreign investors to participate in the Shanghai Stock Exchange. Any individual investor outside of China must be aligned with a Qualified Foreign Institutional Investor in order to trade companies listed on this exchange.
A more accessible way to access the China stock market may be through mutual funds offered domestically. The Fidelity China Region Fund (FHKCX) is a strong choice despite the 1.11% expense ratio. (Expense ratios will tend to be higher for international funds.) Vanguard does not have a comparable fund, and FHKCX is up 31.25% so far this year.
Funds like FHKCX invest in Chinese companies, and it’s unlikely, if western companies begin trading on the Shanghai Stock Exchange, that these funds will include shares of these western companies in their portfolios. So this doesn’t solve the problem of accessing the shares of these companies that would theoretically be traded in China.
Regardless, if companies see China as an opportunity for growth and capital, it might not hurt to follow them by investing overseas.
Photo credit: SmokingPermitted
Coca-Cola, GE, Wal-Mart May Seek China IPO, UBS Says, Allen Wan and Veronica Navarro Espinosa, Bloomberg, June 17, 2009
Shanghai Stock Exchange, Wikipedia, June 17, 2009