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It’s easier than ever to invest in Chinese stocks. Here’s how to get the most value

'China\'s domestic equity markets look frothy after more than doubling in 12 months,' said BlackRock Investment Institute in its latest report. 'We prefer less expensive Hong Kong-listed Chinese equities, especially small and medium-sized stocks, because they have suffered a liquidity discount that is set to dissipate.' Above, commercial and residential buildings sit in Hong Kong.

China’s mainland stock exchange has been red hot over the past year and may get another big lift now that MSCI Inc. is anticipated to add domestically listed A-shares to its influential global market indexes, making it easier for investors to access them.

But it\’s Chinese H-shares traded in Hong Kong that may offer the best value to investors in the longer run.

“China\’s domestic equity markets look frothy after more than doubling in 12 months,” said BlackRock Investment Institute in its latest report.

“We prefer less expensive Hong Kong-listed Chinese equities, especially small and medium-sized stocks, simply because they have a break down liquidity discount that\’s set to dissipate.”

A-shares have traditionally only been available to buy by China’s mainland citizens, with foreign investors having limited access through a tightly regulated program known as the Qualified Foreign Institutional Investor (QFII) system.

H-shares, by comparison, trade in Hong Kong or other international stock markets and therefore are widely available to all investors with a few exceptions including mutual funds in mainland China, which have restricted access.

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