Mainland
China has a second, smaller, stock exchange: the Shenzhen
Stock Exchange, located in the city of Shenzhen. The distinction
is made for Mainland China because the Hong Kong Stock Exchange,
located in the special administrative region of Hong Kong,
is the largest stock exchange in China, and has a separate
history.
The formation
of the International Settlement (foreign concession areas)
in Shanghai as a result of the Treaty of Nanking of 1842 (which
ended the First Opium War) and subsequent agreements between
the Chinese and foreign governments are crucial to the development
of foreign trade in China and of the foreign community in
Shanghai. The market for securities trading in Shanghai begins
in the late 1860s. The first share list appeared in June 1866
and by then Shanghai's International Settlement had developed
the conditions conducive to the emergence of a share market:
several banks, a legal framework for joint-stock companies,
and an interest in diversification among the established trading
houses (although the trading houses themselves remained partnerships).
In 1891
during the boom in mining shares, foreign businessmen founded
the "Shanghai Sharebrokers' Association" headquartered in
Shanghai as China's first stock exchange. In 1904 the Association
applied for registration in Hong Kong under the provision
of the Companies ordinance and was renamed as "Shanghai Stock
Exchange". The supply of securities came primarily from local
companies. In the early days, banks dominated private shares
but, by 1880, only the Hong Kong and Shanghai local banks
remained.
Later
in 1920 and 1921, "Shanghai Securities & Commodities Exchange"
and "Shanghai Chinese Merchant Exchange" started operation
respectively. An amalgamation eventually took place in 1929,
and the combined markets operated thereafter as the "Shanghai
Stock Exchange". Shipping, insurance, and docks persisted
to 1940 but were overshadowed by industrial shares after the
Treaty of Shimonoseki of 1895, which permitted Japan, and
by extension other nations who had treaties with China, to
establish factories in Shanghai and other treaty ports. Rubber
plantations became the staple of stock trading beginning in
the second decade of the 20th century.
By the
1930s, Shanghai had emerged as the financial center of the
Far East, where both Chinese and foreign investors could trade
stocks, debentures, government bonds, and futures. The operation
of Shanghai Stock Exchange came to an abrupt halt after Japanese
troops occupied the Shanghai International Settlement on December
8, 1941. In 1946, Shanghai Stock Exchange resumed its operations
before closing again 3 years later in 1949, after the Communist
revolution took place.
After
the Cultural Revolution ended and Deng Xiaoping rose to power,
China was re-opened to the outside world in 1978. During the
1980s, China's securities market evolved in tandem with the
country's economic reform and opening up and the development
of socialist market economy. On 26 November 1990, Shanghai
Stock Exchange was established again and began operation a
few weeks later on 19 December.
Chronology
- 1866
- The first share list appeared in June.
- 1871
- Speculative bubble burst triggered by monetary panic.
- 1883
- Credit crisis resulted speculation in Chinese companies.
- 1890
- Bank crisis started from Hong Kong.
- 1891
- "Shanghai Sharebrokers Association" established.
- 1895
- Treaty of Shimonoseki opened Chinese market to foreign
investors.
- 1904
- Renamed to "Shanghai Stock Exchange".
- 1909-1910
- Rubber boom.
- 1911
- Revolution and the abdication of the Qing Dynasty. Founding
of the Republic of China.
- 1914
- Market closed for a few months due to the Great War (World
War I).
- 1919
- Speculation in cotton shares.
- 1925
- Second rubber boom.
- 1929
- "Shanghai Securities & Commodities Exchange" and "Shanghai
Chinese Merchant Exchange" were merged into the existing
Shanghai Stock Exchange.
- 1931
- Incursion of Japanese forces into northern China.
- 1930s
- The market was dominated by the rubber share price movements.
- 1941
- The market closed on Friday 5 December. Japanese troops
occupied Shanghai.
- 1946-1949
- Temporary resumption of the Shanghai Stock Exchange until
the Communist takeover. Founding of the People's Republic
of China in 1949.
- 1978
- Deng Xiaoping re-opened China to the rest of the world.
- 1981
- Trading in treasury bonds were resumed.
- 1984
- Company stocks and corporate bonds emerged in Shanghai
and a few other cities.
- 1990
- The present Shanghai Stock Exchange re-opened in November
26 and began operation on December 19.
- 2001-2005
- A four-year market slump which saw Shanghai's market value
halved (after reaching a peak in 2001). A ban on new IPOs
was put in April 2005 to curb the slump and allow more than
US$200 billion of mostly state-owned equity to be converted
to tradable shares.
- 2006
- The SSE resumed full operation as the yearlong ban on
IPOs was lifted in May. The world's largest ever (US$21.9
billion) IPO by the Industrial and Commercial Bank of China
(ICBC) was launched in both Shanghai and Hong Kong stock
markets.[1]
- 2007
- A "stock market frenzy" as speculative traders rush into
the market, making China's stock exchange temporarily the
world's second largest in terms of turnover.[2] Fears of a market bubble and intervention by authorities
caused large fluctuation not seen since the past decade.[3]
[4]
Structure
The securities
listed at the SSE include the three main categories of stocks,
bonds, and funds. Bonds traded on SSE include treasury bonds
(T-bond), corporate bonds, and convertible corporate bonds.
SSE T-bond market is the most active of its kind in China.
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 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) system.
There is a plan to eventually merge the two types of shares.
The SSE
is open for trading every Monday to Friday. The morning session
begins with centralized competitive pricing from 09:15 to
09:25, and continues with consecutive bidding from 09:30 to
11:30. This is followed by the afternoon consecutive bidding
session, which starts from 13:00 to 15:00. The market is closed
on Saturday and Sunday and other holidays announced by the
SSE.
Market
Data
As of
February 2008, 861 companies were listed on the SSE and the
total market capitalization of SSE reached RMB 23,340.9 billion
(US$3,241.8 billion; US$1 = RMB 7.20).
SSE's
top ten largest stocks
Source:
Shanghai Stock Exchange (market values in RMB/Chinese Yuan).
Data arranged by market value. Updated on 15 January 2007
- Industrial
and Commercial Bank of China (1,397.86 billion)
- China Life
Insurance (904.78 billion)
- Bank of China (887.31
billion)
- Sinopec
(692.22 billion)
- China Merchants Bank
(201.09 billion)
- Shanghai
International Port (Group) (164.56 billion)
- Baosteel (161.81 billion)
- Daqin Railway (114.71
billion)
- CITIC
Securities (107.99 billion)
- Shanghai
Pudong Development Bank (104.30 billion)
Indexes
-
The SSE
Composite Index is the most commonly used indicator to reflect
SSE's market performance. Constituents for the SSE Composite
Index are all listed stocks (A shares and B shares) at the
Shanghai Stock Exchange. The Base Day for the SSE Composite
Index is December 19, 1990. The Base Period is the total market
capitalization of all stocks of that day. The Base Value is
100. The index was launched on July 15, 1991. At the end of
2006, the index reaches 2,675.47. Other important indexes
used in the Shanghai Stock Exchanges include the SSE 50 Index
and SSE 180 Index.
Listing
Requirements
According
to the regulations of 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 criteria:
- 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.
- The
company must have been in business for more than 3 years
and have made profits over the last three consecutive years.
This requirement also applies to former state-owned enterprises
reincorporating as private or public enterprises. 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 whose total share capital exceeds RMB 400 million,
the ratio of publicly offered shares must be more than 15%.
- The
company must not have committed any major illegal activities
or false accounting records in the last three years.
Other
conditions stipulated by the State Council. The conditions
for applications for the listing of shares by limited companies
involved in high and new technology are set out separately
by the State Council.
See
also
Lists
References
External
links
