Abacus | Brace for an even bigger bubble in China’s stock markets

Alibaba, Baidu, JD.com, Weibo: they are among the biggest giants of China’s internet. Providing everything from search and messaging to shopping and financial services to hundreds of millions of users each day, these and other Chinese technology companies dominate Chinese cyberspace every bit as much as Amazon, Facebook and Google monopolise the web in the rest of the world.

But there is one important difference between China’s tech behemoths and their US counterparts. The likes of Facebook, Amazon, Apple, Netflix and Google don’t just dominate the online lives of their users in the US. They also dominate the stock portfolios. Last year, the benchmark US S&P 500 stock index climbed 19 per cent. Of that performance, a quarter was delivered by this small quintuplet of tech stocks, the so-called FAANGs, which on average rose 57 per cent.

US$400 billion? Er, calm down. The MSCI is no biggie for Chinese stock markets

In sharp contrast, China’s own national internet champions don’t figure at all in the portfolios of mainland Chinese investors. Shares in Alibaba, Baidu and Weibo, to name three, are publicly listed, but on US, rather than mainland Chinese stock exchanges.

That hasn’t detracted from their share price performance, which has been just as impressive as that of the FAANGs. Last year, shares in Weibo, for example, leapt by 149 per cent. But with access to US markets forbidden by China’s regulations, mainland investors, who love nothing better than a hot tech stock, have badly missed out.

Until now. Earlier this month, the Chinese authorities published regulations to govern the listing on mainland exchanges of so-called Chinese depositary receipts, or CDRs. These instruments will, for the first time, allow ordinary Chinese investors to buy a stake in their favourite technology giants.