What does red chip stock mean? Red chip stock, in English redchips, redchipshares, redchipstocks, is a type of stock born in the Hong Kong stock market. China is sometimes called Red China internationally. Red chip stocks are registered overseas and in Hong Kong. Listed stocks with mainland China concepts. Nowadays, shares issued by companies with the largest controlling interest (often referring to more than 30%) that are directly or indirectly affiliated with relevant departments or enterprises in mainland China and are registered and listed in Hong Kong are classified as red chip stocks. Generally, there are three return methods for red chip stocks: CDR mode (issuance of depository receipts), China Unicom mode, and direct issuance of A shares. China Unicom's model is to spin off subsidiaries and list them domestically. This dual structure can easily lead to problems in corporate governance. At the same time, it is not in line with the idea of ??an overall listing. The CDR model is suitable for truly foreign-funded companies. The use of the CDR model will involve foreign exchange controls. At the same time, it involves many links and is not as simple as the direct issuance of A shares. The custody and depositary business will allow major market benefits to flow into foreign financial institutions.
What is a red chip stock? There is still some controversy over how to define a red chip stock. There are two main views. One view is that they should be distinguished according to business scope. If a listed company's main business is in mainland China and most of its profits come from this business, then the stock of this company registered outside China and listed in Hong Kong is a red chip stock. The red chip index compiled by international information company Bloomberg is selected based on this criterion. Another view is that it should be divided according to the amount of rights and interests. If the majority of a listed company's shareholders' equity comes directly from mainland China, or has a mainland background, that is, it is controlled by Chinese capital, then the company's stocks registered outside China and listed in Hong Kong will only be classified as red chips. In April 1997, when Hang Seng Index Services Company started compiling the Hang Seng Red Chip Index, it used this standard to delineate red chip stocks. Typically, stocks of both types of companies are considered red chips by investors.