Red Chip

“Red chip” is the term we use for a company that is based in mainland China, incorporated internationally, and listed on the Hong Kong Stock Exchange.

Why red? One look at the Chinese flag should answer that question pretty quickly. (Hint: it’s red.)

Anyway, the Hong Kong Stock Exchange is kind of a big deal, seeing as how it’s one of the largest markets in Asia and all, and there are pretty strict rules about the companies who trade on it. This makes it super-attractive to foreign investors. But if the Hong Kong Stock Exchange is a cake, then red chip stocks are the icing. They offer a safe and regulated way for those foreign investors to get in on (and profit from) some of that impressive Chinese economic growth action.