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Shanghai and Shenzhen Stock Exchange 101

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stocksexchange1(Oct. 8, 2009 - Barath K.) Executive summary: This report provides key details on the two main stock exchanges of China. It briefly describes the overview, types of shares, listing requirements and performance of each of the two exchanges: Shanghai Stock Exchange and the Shenzhen Stock Exchange. 


1. Shanghai Stock Exchange:

The Shanghai Stock Exchange (SSE) was founded on November 26th, 1990 and in operation since December 19th the same year. It is a membership institution directly governed by the China Securities Regulatory Commission (CSRC).By end of December 2007, the exchange had over 71.30 million investors and 860 listed companies. The total market capitalization of SSE hit RMB 26.98 trillion equivalent to 3.95 trillion U.S dollars* with an average daily turn-over of 16.8 billion U.S dollars approximately. In 2007, Capital raised from SSE market surpassed RMB 661.6 billion equivalent to 97.57 billion U.S dollars*.It is Asia's second largest stock exchange by market capitalization, behind the Tokyo Stock Exchange.

1.1. Types of shares:

There are two types of stocks being issued in the Shanghai Stock Exchange: ‘A’ shares and ‘B’ shares. ‘A’ shares are priced in the local renminbi yuan currency, while B shares are quoted in U.S. dollars. Initially, trading in ‘A’ shares are restricted to domestic investors only while B shares are available to both domestic (since 2001) and foreign investors. However, after reforms were implemented in December 2002, foreign investors are now allowed (with limitations) to trade in A shares under the Qualified Foreign Institutional Investor (QFII) program which was officially launched in 2003. Currently, a total of 79 foreign institutional investors have been approved to buy and sell ‘A’ shares under the QFII program. Quotas under the QFII program are currently US$30 billion.1 There has been a plan to eventually merge the two types of shares in the future.2


Trading Summary for 2007

Stock listings

Market value
(billion
yuan)

Annual turnover value
(billion
yuan)

A shares

850

26,849.7

30,196.0

B shares

54

134.2

347.4

Total

904

26,983.9

30,543.4


1.2. Listing Requirement:

According to the regulations of the “Securities Law of the People’s Republic of China” and “Company Law of the People’s Republic of China”, limited companies applying for the listing of shares must meet the following conditions:

  • The shares must have been publicly issued following approval of the State Council Securities Management Department.
  • The company’s total share capital must not be less than RMB 50 million.(equivalent to 7.32 million U.S dollars*)
  • The company must have been in business for more than 3 years and have main profits over the last three consecutive years. In the case of former state-owned enterprises re-established according to the law or founded after implementation of the law and if their issuers are large and medium state owned enterprises, it can be calculated consecutively. The number of shareholders with holdings of values reaching in excess of RMB 1,000 must not be less than 1,000 persons. Publicly offered shares must be more than 25% of the company’s total share capital. For company’s whose total share capital exceeds RMB 400 million, the ratio of publicly offered shares must be more than 15%.
  • The company must not have been guilty of any major illegal activities or false accounting records in the last three years.

1.3. Performance:

The SSE Composite (also known as Shanghai Composite) Index is the most commonly used indicator to reflect SSE's market performance. The Base Day for the SSE Composite Index is December 19, 1990. The Base Value is 100. The index was launched on July 15, 1991. At the end of 2006, the index reached 2,675.47, peaked at 6092.05 in late 2007 and fell back to 2500 levels in 2009.Other important indexes used in the Shanghai Stock Exchanges include the SSE 50 Index and SSE 180 Index.


2. Shenzhen Stock Exchange:

The Shenzhen Stock Exchange (the SSE) is a national stock exchange under the China Securities Regulatory Commission (the CSRC), that provides a venue for securities trading. A broad spectrum of market participants, including 540 listed companies, 35 million registered investors and 177 exchange members, create the market. Since its creation in 1990, the SSE has blossomed into a market of great competitive edges in the country, with a market capitalization around RMB 1 trillion (US$ 122 billion). On a daily basis, around 600,000 deals, valued US$ 807 million, trade on the SSE. It is the 9th largest stock exchange in Asia by market capitalisation by 2008.3

2.1. Types of shares:

There are 2 types of shares A and B. Type A are available only to local investors quoted in RMB and type B shares are available only to foreign investors and quoted in U.S dollars.

2.2. Listing requirements:


  1. IPO granted by the China Securities Regulatory Commission;
  2. Minimum 25% public holding;
  3. Corporate size no smaller than RMB 30 million; and
  4. Good credit records in the past three years.


2.3. Performance: The Shenzhen composite index, the most common index used in this exchange began April 3, 1991, with a base price of 100. It traded at 300 levels in 2005, peaked at 1570 in 2008 and fell back to 1100 levels in 2009. It is Asia's third largest stock exchange in terms of market capitalisation, behind the Tokyo Stock Exchange and the Shanghai Stock Exchange.



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