China Stock – Overview

China Stock – Overview

The Shanghai Stock Exchange (SSE), is a stock exchange that is based in the city of Shanghai, China. It is one of the two stock exchanges operating independently in the People’s Republic of China, the other being the Shenzhen Stock Exchange. Shanghai Stock Exchange is the world’s 5th largest stock market by market capitalization at US$3.5 trillion as of February 2016, and 2nd largest in East Asia and Asia. Unlike the Hong Kong Stock Exchange, the Shanghai Stock Exchange is still not entirely open to foreign investors due to tight capital account controls exercised by the Chinese mainland authorities and often manipulated by the decisions of the Central Government.

The Shenzhen Stock Exchange (SZSE) is the other one China’s stock exchange. It is based in the Futian district of Shenzhen, Guangdong. With a market capitalization of its listed companies around US$2.3 trillion, it is the 8th largest stock exchange in the world, and 4th largest in East Asia and Asia. There are two types of stocks being issued in the SSE & SZSE: “A” shares and “B” shares. A shares are priced in the local renminbi yuan currency, while SSE B shares are quoted in U.S. dollars & SZSE B shares quoted in H.K. dollars. Trading in A shares are restricted to domestic investors only but foreign investors can trade A shares with limitations under the Qualified Foreign Institutional Investor (QFII) and Hong Kong-Shanghai stock connect scheme.

First launched in November 2014, the Hong Kong-Shanghai and Hong-Kong-Shenzhen Stock Connect scheme now covers over 2,000 eligible equities in Shanghai, Shenzhen and Hong Kong. A unique collaboration between the Hong Kong, Shanghai and Shenzhen Stock Exchanges, Stock Connect allows international and Mainland Chinese investors to trade securities in each other’s markets through the trading and clearing facilities of their home exchange.

Trading of SSE Securities under Shanghai Connect is open to all Hong Kong and overseas investors including institutional and individual investors. Trading of SZSE Securities, under Shenzhen Connect except ChiNext stocks, is open to all Hong Kong and overseas investors including institutional and individual investors. ChiNext stocks will be limited to institutional professional investors during the initial launch of Shenzhen Connect.

Under Shanghai Connect, SSE Securities that are eligible for trading by Hong Kong and overseas investors include all the constituent stocks of the SSE 180 Index and the SSE 380 Index, and all the SSE-listed A shares that are not included as constituent stocks of the relevant indices but which have corresponding H shares listed on SEHK, except SSE-listed shares which are not traded in RMB and SSE-listed shares which are under risk alert.

Under Shenzhen Connect, SZSE Securities that are eligible for trading by Hong Kong and overseas investors include all the constituent stocks of the SZSE Component Index and the SZSE Small/Mid Cap Innovation Index which have a market capitalization of not less than RMB 6 billion, and all the SZSE-listed A shares which have corresponding H shares listed on SEHK, except SZSE-listed shares which are not traded in RMB and SZSE-listed shares which are under risk alert or under delisting arrangement.

Source: Wikipedia, HKEX