“Red Chip” means as long as at least more than 35% of the listed company’s shareholding is directly held by Mainland China entities. As for now, there are over 40 Red Chips listed in Hong Kong, in which the constituent stocks of Hang Seng China Affiliated Corporations Index are composed of 46 listed companies. Some of the “Red Chips” will be selected as the Hang Seng China Affiliated Corporations Index.

Red Chips are mainly shares issued by Hong Kong companies with Chinese capitals that have businesses, assets market shares and ownerships in Mainland China or even overseas markets. Red Chips are not registered in Mainland China, most of them are registered in Hong Kong or other offshore tax free zones; the shares are denominated in currencies other than RMB. Another important difference between Red Chip company and companies registered in China is that shares issued by Red Chip company are marketable stocks ( not the same as Chinese state-owned companies categorised their shares into different parts) , whilst they do not divide their shares into domestic investors’ shares and foreign investors’ shares. The issuance and trading of Red Chip shares are not different from shares issued by other Hong Kong companies that are listed publicly, because Red Chip company is not defined or categorised officially by any listing rule. Red Chip shares (composition listed in the following table) include companies controlled by the State Council (such as The China Everbright Group, CITIC Group), or companies owned by ministries, bureau and other state-owned organisations, (such as China Resources Holdings Ltd., China Merchants Group, China Travel International Company Ltd.), and companies controlled by provincial or municipal authorities.

Growth Enterprise Market is launched by the Hong Kong Stock Exchange in November of 1999, with an aim to provide a channel for high potential companies to raise its funds. Independent from Hong Kong’s main board, but not designed as the pre-board for companies to list on the main board. The Growth Enterprise Market does not require growth companies to have achieved a record of profitability as a condition of listing. Besides the listing of local and regional enterprises, international growth enterprises can enhance their business presence and raise their product profile in China and Asia by listing on the Growth Enterprise Market Board.

For shares that enjoy the statuses of both Red Chips and Blue Chips, the market considered them as purple chips; China Resources (0291), CITIC (0267), China Telecomm (0941), Shanghai Industrial Holding (0363) are examples of Purple Chip enterprises. (Purple is a combination of red and blue colours, so companies’ shares that have the standings of both Red Chip and Blue Chip are called Purple Chip)
Since Purple Chip posse double identities, its price is more volatile, because it is influenced by both the Hang Seng Index and the Red Chip Index. In terms of the outlook, Purple Chip enterprises benefit from the robust economic growth in China as their businesses are in China; furthermore, those companies have the leading positions as Blue Chip companies do.

As for some companies in which most of their assets in and revenues generated from mainland China, such as Cheung Kong Infrastructure Holdings Limited (1038) and New World TMT Limited (0301); these shares are considered Purple Chips, as the performances of their stocks are strongly correlated with the economic up-and –down of China and less correlated with the economy of Hong Kong. Purple Chip shares enjoy stable returns, therefore, when the economy is slowing down or when the stock market is over heated in Hong Kong, they become the haven of capitals, welcomed by fund managers.