DEFINITION of 'Red Chip'

A red-chip company is one that is based in Mainland China but incorporated internationally and listed on the Hong Kong Stock Exchange. Red-chip stocks are expected to maintain the filing and reporting requirements of the Hong Kong exchange, which makes them a main outlet for foreign investors who wish to participate in the rapid growth of the Chinese economy.

Red chips may be issued in addition to A-shares in the same companies, although only Chinese citizens can invest in A-shares.

BREAKING DOWN 'Red Chip'

Over 30 red chip stocks (a reference to the color of China's flag) make up the Hang Seng China-Affiliated Corporations Index.

As of June 2018, the index consisted of:

The above companies are in order of highest to lowest volume of trades.

As a sign of the pent-up demand among mainland Chinese citizens for Chinese stocks, the A-shares they are permitted to invest in often have significant premiums compared to red chips for the exact same companies.

Red Chip and the Hong Kong Stock Exchange

The Hong Kong Stock Exchange (HKG) is a member of the HKEX Group and the leading venue for capital raising activity for Hong Kong and Mainland Chinese issuers. The exchange traces its origins to the founding of China's first formal securities market, the Association of Stockbrokers in Hong Kong, in 1891. A second market opened in 1921, and in 1947, the two merged to form the Hong Kong Stock Exchange. Today, the Hong Kong Stock Exchange is of the world's largest securities markets by market capitalization.

RELATED TERMS
  1. Hong Kong Stock Exchange (HKG) ...

    The Hong Kong Stock Exchange is a member of the HKEX Group and ...
  2. Hong Kong SAR, China

    Hong Kong is a financial and business center in China, known ...
  3. Hong Kong Exchanges and Clearing ...

    Hong Kong Exchanges and Clearing Limited (HKEx) is a publicly-traded ...
  4. Hong Kong Monetary Authority Investment ...

    The Hong Kong Monetary Authority Investment Portfolio is an investment ...
  5. Hong Kong Interbank Offered Rate ...

    The Hong Kong Interbank Offered Rate (HIBOR) is a Hong Kong dollar-based ...
  6. B-Shares

    B-shares are equity share investments in companies based in China. ...
Related Articles
  1. Investing

    Hong Kong versus China: Understand the differences

    The century-long separation between mainland China and Hong Kong created political and economic gaps that cannot be easily bridged.
  2. Investing

    How To Trade the Hong Kong Stock Exchange through ETFs (ETFC, EWH)

    The Hong Kong Stock Exchange is the eighth largest in the world and easily accessible through ETFs.
  3. Insights

    Six Economic Reasons For Hong Kong Independence Protests

    Though the protests were ignited by a political controversy, there may be economic reasons behind them as well. Here are six reasons a thirst for democracy may not be the whole story in Hong ...
  4. Investing

    The Top 3 ETFs For Investing in Hong Kong

    Discover information and analysis of three exchange traded funds that investors can use to access potential profits from investing in Hong Kong.
  5. Investing

    Charles Schwab: Hong Kong's Rising Affluent Investors Keen on Diversification

    A new survey shows that rising affluent Hong Kong investors want overseas diversification but are hesitant to make the leap.
  6. Investing

    EWH: iShares MSCI Hong Kong ETF

    Learn about the iShares MSCI Hong Kong fund, which invests in various equities of companies listed on the Hong Kong Stock Exchange.
  7. Investing

    Disney Offers to Share Cost of Hong Kong Expansion

    Walt Disney Co. may aid in expanding Hong Kong Disneyland in exchange for a bigger stake.
  8. Insights

    What You Should Know About Hong Kong SAR

    You might know that Hong Kong is both a bastion of capitalism separate from (but also administered by) socialist China. How did it get that way?
  9. Trading

    China's Top Trading Partners

    A slowdown in China, the largest trading nation in the world, will have significant impacts on major trading partners: the U.S., Hong Kong, and Japan.
  10. Investing

    This is the Cheapest Major Stock Market Globally

    Hong Kong's Hang Seng Index trades at a P/E of 9, compared with a P/E of between 15 and 20 for most major indices.
RELATED FAQS
  1. Why is Hong Kong considered a tax haven?

    Discover why Hong Kong is one of the world's leading tax havens. Low taxation on high-net-worth individuals and corporations ... Read Answer >>
  2. What are the most common market indicators to follow the Chinese stock market and ...

    Learn the most commonly followed market and economic indicators used by market analysts to track the Chinese stock market ... Read Answer >>
  3. What are some examples of free market economies?

    In a free market economy, the law of supply and demand, rather than a central government, regulates production and labor. ... Read Answer >>
Trading Center