What is the China A50 and how do you trade or invest in it?

What is the China A50 Index?

The China A50 is a stock market index comprising 50 A-rated shares, listed on the Shanghai and Shenzhen Stock Exchanges. Stocks are selected based on market capitalisation and are used as a benchmark for equity investment in Mainland China.

In the last few decades, China has grown from being a developing country to a global economic giant – this phenomenal growth has led to increased demand for Chinese investment, and an increase in the A50’s popularity.

What companies are in the China A50 Index?

Some of the big names listed in the China A50 index include Ping An Insurance, China Merchants Bank, Sany Heavy Equipment, China Petroleum & Chemicaland Great Wall Motor. The 50 companies are reviewed quarterly by an independent committee to ensure it remains representative of the underlying Chinese market.

The index is dominated by five sectors namely:

• Banking – averaging 44% of the index, China has the largest banking sector in the world
• Life insurance – representing 13% of the market, life insurance has grown exponentially since 2008
• Consumer goods – with a 12% weight in the index, China has a strong market for consumer goods
• Industrials – industrial activity contributes about 40% to the GDP, making it the fourth biggest sector at 11%
• Financial services – investment opportunities, as well as other speciality financial services have boosted the economy and given the sector an 11% share in the market

What moves the price of China A50?

The China A50 price is primarily moved by the share price of the companies listed in the index. Because some companies hold more weight than others, an upward or downward movement in the price of banking stocks, for example, will lead to changes in the price.

Here are some of the most significant factors that can move the index:

• Currency rates – a weaker or stronger Chinese yuan (CNY) can affect the prices of stocks
• News updates – reports about the state of the country’s economic and political well-being can move the index price in either direction
• Changes in a major sector – fluctuations in the price of a sector with a higher index weight. If a sector like banking has a major dip or upswing, it would affect the share price
• Trade partnerships – if China’s relations with other countries, especially major trade partners like the US or Russia are threatened or change in any way, it could affect the index

Why trade the China A50?

Due to its high liquidity and low spreads, the China A50 is a popular market among traders. With a single position, you can gain exposure to an entire industry or sector.

Because the index consists of major companies within China, you can monitor the economic and political climate of the country to predict how the market will move.

For example, if you take a position in the China A50 based on the direction of a major constituent, like China Merchants Bank – if the bank releases its earning reports and the report isn’t favourable, the share price might take a dip.

Reasons why many traders choose the China A50 include:

• Liquidity – the index is highly liquid because it represents the 50 most profitable companies in China, and there is usually a lot of activity taking place in the individual stocks
• Diversification – you get access to different sectors. With one position you get exposure to five major sectors, including finance, life insurance and industrial
• Consistency – because of the calculation of the index, the price is relatively consistent, and no one stock can significantly impact it

How to trade or invest in the China A50

1. Choose whether you want to trade or invest
2. Open a live account or practise on a demo
3. Set your position size
4. Take steps to manage your risk
5. Place your deal and monitor your position

Trade the China A50 index price directly

You can trade the China A50 price directly with us. You’ll choose between spread bets or CFDs to take a position, and your profit or loss will depend on the outcome of your prediction.

With spread bets, you’ll trade the China A50 index by betting a certain amount per point of movement in the underlying’s price. Alternatively, you can use CFDs to buy or sell contracts to exchange the price difference of the index between the opening and closing positions.

You can trade this on the spot price, which is closest to the underlying price with low spreads but includes overnight fees. Or you can trade options, and take advantage of low-cost and high leverage. Alternatively, you’ll trade via futures which have wider spreads but no overnight fees using our spread betting or CFD trading account.

Trade or invest in China A50 related ETFs

China A50-linked ETFs enable you to track the index’s price. These funds will be based on the ETFs’ net asset value and the price will rise and fall in line with the China A50 price.

If you’re looking for a long-term investment, this is a suitable way to buy and hold assets using our share dealing account. You can also trade ETFs with spread bets or CFDs, but this offers lower liquidity and larger spreads than trading the China A50’s price directly.

Trade or invest in China A50 listed shares

Another way of getting exposure is trading or investing in individual China A50 stocks, such as Cosco Shipping, Haier Smart Home and China Life Insurance.

You’ll buy and hold the actual shares in a China A50-listed company using our share dealing account. Alternatively, you’ll trade the share price, speculating on price movements using spread bets or CFDs without owning the underlying asset.

China A50 summed up

• The China A50 is an index that includes 50 A-listed companies based in China
• There are five major sectors represented in the China A50 – banking, life insurance, consumer goods, industrials and financial services. Traders and investors often choose the China A50 because of its liquidity, and they’re able to take a position in an entire sector with one position
• Different factors affect the China A50 price such as currency rates, news updates, changes in a major sector and trade partnerships
• With us, you’ll trade the China A50 directly with us using spread bets or CFDs to speculate on the spot index, forwards, options, ETFs and listed shares
• Alternatively, you’ll use our share dealing account to invest in China A50-listed stocks and related ETFs