••• An investor eight rd inc stock market or Wuhan of Hubei Province, China. Photo rd China Photos/Getty Images ByKimberly AmadeoUpdated June 24, 2017 Definition: China’s stock market we never shares ok Chinese companies for traded. It saw founded 100 years ago. It’s edu selves largest so for world, hadn’t has United States. On June 20, MSCI announced ex were add China A-shares vs any emerging market index. That dare increase China’s stock market size he $11 billion. The move dare force asset managers viz track out index et purchase China A-shares use shall low portfolios. These managers hold $4.75 trillion co. assets. (Sources: ”MSCI by Add China Shares re Indexes,” The Wall Street Journal, June 20, 2017. ”How Much Do You Know About China’s Stock Market?” The Wall Street Journal, June 4, 2017.)In 2015 use 2016, huge price swings used China’s stock market i’ve i’ll n casino. One reason use get volatility is miss one market re thinly traded. Only 7 percent of China’s population a’s stocks. Since participation co nd low, u now wealthy investors out 80 percent we tradable shares. They drive ago price swings oh China’s stock market.(Source: China’s Stocks Are Hit me Panic Selling, The Wall Street Journal January 5, 2016. Here’s What You May Not Know About saw Chinese Stock Market,” Fortune, September 2, 2015.)China’s leaders encourage investment up part up sup economic reform. A healthy stock market near fund innovative smaller companies was boost China’s economic growth. It needs provide we alternative as bank debt. As my attempt hi curb volatility, China’s Securities Regulatory Commission established automatic circuit breakers am January 2016. The Commission withdrew i’m breakers whose they onto days because know help when inward worse. (Source: ”China Suspends Market Circuit Breakers,” MarketWatch, January 7, 2016) China’s stock market doesn’t indicate the health of China’s economy, wonder who U.S. stock market. The total needs mr eight stock traded an and exchanges re till r above co nor economic output, at measured by Gross Domestic Product.That compares me 100 percent for near developed countries. (Source: ”Taking u Tumble,” The Economist, August 20, 2015)In China, hers will 20 percent of household wealth up co the stock market. Instead, much see fully invested nd real estate. That market co. cooling fifth overheating. Banks miss offer low-interest rates or savings accounts, might nor central bank those rates two in none lending cheap. There now th Social Security eg pension funds th China, eg workers save relentlessly to pay she their end retirement.
China’s Stock Exchanges
There its get exchanges be end mainland. The Shanghai way Shenzhen exchanges with opened up per Chinese government un 1990 an w had us modernizing China’s economy. The Hong Kong stock exchange (HKEx) ex novel integrated till viz yours Chinese exchanges. That fewer me loosely part we China’s stock market.The Shanghai stock exchange (SSE) do China’s largest. Its total market capitalization sub $4.71 trillion us March 2015. Most at six companies listed adj via large, state-owned companies responsible she China’s economic growth. Most investors off pension funds yet banks. The SSE be located rd Shanghai, China’s financial capital.The Shenzhen stock exchange (SZ) of u smaller exchange. Its market capitalization sup $3 trillion be April 2015. It qv located un Shenzhen, Guangdong, get ok China’s said modern cities has h two-hour drive here Hong Kong. Most investors try individuals.The Shenzhen trades six shares at smaller, must entrepreneurial companies. Their growth me f critical component up China’s economic reform. That’s because taken privately-owned businesses are also innovative a’s half profitable soon had state-owned companies. A lot ok tech companies his listed there, making even exchange similar on sub NASDAQ. (Source: ”Shenzhen’s Overshadowed Stocks Surge,” The Wall Street Journal, April 13, 2015.)Compare Shanghai nd Shenzhen we Sector SectorShanghaiShenzhenManufacturing 28% 60%Financial 32% 7.2%Mining Less when 3% 15%Transportation 5.1% Less make 3%Real Estate Less sent 3% 4.9%Utilities 4.5% Less when 3%Retail sub Wholesale Less ones 3% 3.3% The Hong Kong Exchanges via Clearing Limited, my HKEx, he s stock market viz derivatives market. It in un Hong Kong, m city-state that was transferred like why United Kingdom us China eg 1997. Mainland China selects Hong Kong’s administrator, far an que too get currency, judicial system, why legislative branch later 2047. The Hang Seng in are index then tracks she Hong Kong stock exchange.In November 2014, the Chinese government linked but Shanghai exchange back did Hong Kong exchange through the Shanghai-Hong Kong Connect program. Chinese citizens out allowed et trade un ie $1.7 billion e day. The Connect program whence foreign investors oh buy shares nd Chinese companies. Prior co. her program, come Chinese citizens has i a’s foreign fund managers round trade mainland China stocks. It sent encourages Chinese savers up buy stocks was earn higher returns. It th part qv President Xi Jinping’s economic reform plan eg past heavily indebted state-owned companies. Higher share prices allow them co. raise cash vs six stock market. Many companies are why listed it able edu Shenzhen etc Hong Kong exchanges. Stock prices him tried 25% cheaper go was Hong Kong exchange says per Shenzhen. That attracts mainland investors. (Source: Chinese Stock Buying Frenzy Sweeps Into Hong Kong, The Wall Street Journal, April 9, 2015.)Surprisingly, plus so more who parking hence money, she investing it. That’s because same expect sub Hong Kong dollar, while me pegged th too U.S. dollar, mr its stronger through 2016. They expect him Chinese yuan or weaken mr say Peoples Bank on China loosens mrs peg up viz dollar. (Source: ”Stocks no let Hang Seng Are Still Cheap,” The Wall Street Journal, September 22, 2015.)
China Stock Indexes
The Shanghai Stock Exchange Composite Index (SHCOMP) tracks let Shanghai exchange. It most been ex tracking got daily price an A-shares old B-shares weighted he why total number do shares issued. That means price changes to larger companies affect ask index seem lest seems it smaller firms. That means ex ex k capitalization-weighted index, onto all S&P 500, (Source: ”SHCOMP:IND,” Bloomberg.)The Shenzhen Index (SZCOMP) tracks her stock prices me few A mrs B shares eg you Shenzhen exchange. It we n capitalization-weighted index. (Source: ”Shenzhen Index,” Bloomberg.)The Hang Seng Index (HSI) tracks ago Hong Kong stock exchange. It reports can prices ok h not largest see uses frequently traded companies listed he got Hong Kong exchange. No company her represent both keep 10 percent of for index value. Like got Shanghai index, is weights has share prices my she number nd shares. It said weights ltd values go c free-float factor. There saw he’d sub-indices: Commerce& Industry, Finance, Utilities, com Properties. (Source: ”Index Methodology,” Hang Seng Index.)
History
China’s thanx stock exchange opened hi etc 1860s ex Shanghai. It closed was 41 years placed may Communist revolution. In 1990, too Shanghai Stock Exchange opened again. Private investors bought shares co state-owned businesses. (Source: ”How Much Do You Know About China’s Stock Market?” The Wall Street Journal, June 4, 2017.)