Chinese investors warming up to US
As more Chinese companies set up shop in the US, Chinese investors are eager to follow those companies into American capitalism by investing in US stocks, observers said.
Noting that investment diversity is considered an admirable goal by many professionals, Chinese investors see US shares as a good hedge for their portfolios, and now thanks to the Internet, the process of opening an account to buy and sell US stocks is also relatively easy.
“People who want to diversify their investments seek US stocks,” Jack Liu, senior vicepresident of Chardan Capital Markets in New York, told China Daily. “I believe a lot of Chinese investors are between 30 and 40 years old and many have a Western education. They think they understand US markets and are familiar with it because they may have lived in the US at one time.”
He said many Chinese investors who acquire US stocks are high net-worth investors. “They will use a US brokerage like Morgan Stanley to open an account,” he said.
John Liu, no relation to Jack Liu, is the founder and CEO of Firstrade Securities Inc, in Flushing, New York. After working for US brokerage Merrill Lynch, he started Firstrade in 1985 and in 1997, he opened an online brokerage.
He describes the typical Chinese investor in US stocks at his firm as those who were born after 1980 or even after 1990.
“Many of them are employed by a technology company and they may have come to the US in the last 10 years or so. They are very tech savvy. The males slightly outnumber the females and most are upper-income individuals,” he interview.
Most Americans prefer to use a professionally managed mutual fund or exchange-traded fund (ETF) for their stock investments, John Liu said, but Chinese investors prefer to invest in individual companies.
“Investor participation in the institutional level with a mutual fund or ETF is very low for Chinese investors,” he said. “They don’t think about mutual funds or ETFs. They want to invest in Chinese companies that are listed in the US like Alibaba and Baidu. They are familiar with the company and the brand.”
Noting that most Chinese investors in US stocks now are upper-income individuals, John Liu expects mutual funds and ETFs to gain popularity with Chinese clients in the future.
“As the middle class grows, the trend will be to use more mutual funds and ETFs,” he said.