Blue chip stocks
Originally, blue chip stocks simply meant high-priced stocks. The term was coined back in the 1920s to denote shares selling for more than $200 a piece. Today, the label blue chip stocks is typically used for large and well-established stock corporations with a non-volatile share price. Many of them have successfully survived through both recessions and booms, proving to be both resilient and adaptable to varying market conditions. Due to stock splitting, many of them have share prices considerably below the $200 mark.
You can find out more in our Blue Chip Stock article.
Blue chip stocks are popular among long-term investors who seek low to mid risk. Examples of U.S. corporations generally considered blue chip stock companies are Chevron, General Electric, Procter & Gamble, IBM, Merck, McDonald’s, Coco-Cola, Nike, Boeing, Caterpillar, Pfizer, and UnitedHealth Group.
Shares with a very low shareprice are commonly known as penny stocks. Penny stock companies tend to have a low market capitalization, and many of them are not listed on any stock exchange. Penny stocks tend to experience high volatility, and the liquidity is often low. Penny stocks are often attractive to novice investors due to the low share price and the exciting swings up and down. Regretably, penny stocks are also suseptible to pump-and-dumps and similarly shady plots.
You can find out more in our article on Penny stock.
Green chip stocks
The label ”Green chip stock” is used for stocks in companies considered especially environmentally friendly. In many cases, it means companies that could stand to profit from even tighter environmental protection regulation and from increased public interest in environmentally friendly solutions. Of course, there is no rigid checklist that one can follow to find out of a company should be considered green chip or not.
A good starting point for you further research into gree chip stock investing is the Renewable Energy Industrial Index (RENIXX). This index is comprised of 30 of the world’s largest stock corporations in the renewable energy industry.
Red chip stocks
Shares of mainland China-based companies incorporated outside mainland China and listed on the Hong Kong Stock Exchange are commonly known as Red Chip Stock. Since they are based in mainland China, these companies are directly or indirectly controlled by the Chinese ruling party even though they are incorporated outside mainland China.
Examples of well known red chip stocks
|Beijing Enterprises||(SEHK: 392)|
|Brilliance China Auto||(SEHK: 1114)|
|China Everbright International||(SEHK: 257)|
|China Mobile||(SEHK: 941)|
|China Overseas||(SEHK: 688)|
|China Resources Land||(SEHK: 1109)|
|China Taiping Insurance||(SEHK: 966)|
|China Unicom||(SEHK: 762)|
|CSPC Pharmaceutical Group||(SEHK: 1093)|
|Franshion Properties||(SEHK: 817)|
|Guangdong Investment||(SEHK: 270)|
|Kunlun Energy||(SEHK: 135)|
|Lenovo Group||(SEHK: 992)|
|Yuexiu Property||(SEHK: 123)|
Can foreigners invest in Red Chip Stocks?
Yes, stocks listed on the Hong Kong Stock Exchange can be bought and sold by investors based in Hong Kong and outside Hong Kong.
Why the color red?
The term Red Chip Stock was coined by Hong Kong economist Alex Tang in 1992.
- In traditional Chinese culture, the color red represents good fortune and expansive energy.
- During the Cold War era, the term Red China was utilized in the West to denote the People’s Republic of China, while Nationalist China was used for the Western allied government on the island of Taiwan.
- Red was elected as the official symbol of communism by the Bolsheviks in 1917.
Good to know about Chinese share types
Red Chip Stock – shares of companies that are listed on the Hong Kong Stock Exchange (HKSE) but incorporated in mainland China – are formally known as H-shares since they are included in the Hang Seng China Enterprises Index.
It is not unusual for Chinese companies to float their shares simultaneously on the Hong Kong Stock Exchange, the Shanghai Stock Exchange and the Shenzehn Sock Exchange. In such situations, major price discrepancies tend to occur between H-shares and A-shares from the same company, with A-shares displaying a higher market price than H-shares. The higher A-share price is caused by chinese mainland China investors who are legally restricted from investing abroad.
Other examples of company shares
|Share type||Trading||Additional info||Are they Red Chip Stocks?|
|A-shares||Traded in Renminbi (CNY) on the Shanghai Stock Exchange and on the Shenzhen Stock Exchange.||
The Chinese government restricts foreigners from owning A-shares.
(formally: Domestically Listed Foriegn Investment Shares)
|Face value se in Renminbi (CNY)
Traded in USD on the Shanghai Stock Exchange.
Traded in HKD on the Shenzehn Sock Exchange.
|Until 2001, only foreigners were allowed to buy B-shares. Since then, domestic citizens are also allowed to exchange B-shares, but only via the secondary market.||No|
|L-shares||Traded in GBP on the London Stock Exchange.||Business operations in mainland China.
Incorporated in the Cayman Islands, the British Virgin Islands, Bermuda, or Jersey.
|N-shares||Traded in USD on NYSE, NASDAQ or NYSE MKT.||Business operations in mainland China.
Incorporated inside or outside mainland China, usually the Cayman Islands, the British Virgin Islands, Bermuda, or USA (Delaware or Nevada)
|P chip / P-shares||Traded on the Hong Kong Exchange.||Business operations in mainland China.
Incorporated outside mainland China; in the Cayman Islands, the British Virgin Islands or Bermuda.
|S chip / S-shares||Traded on the Singapore Stock Exchange.||Business operations in mainland China.
Incorporated outside mainland China; in Singapore, the Cayman Islands, the British Virgin Islands or Bermuda.