China Investing - Market with High Long-Term Yield Opportunity
China investing market is sixth largest stock market in the world. It provides investors A, B, H and red chips shares with the third generation system AMS/3.
China investing market includes A, B, H and red-chip shares in the three stock exchanges operating independently as Shanghai, Shenzhen and Hong Kong stock exchanges. Freely tradable shares in a listed Chinese company fall into 4 categories:
China Investing Shares
A shares are trading on Shanghai and Shenzhen stock exchanges in Renminbi, the currency traded in China continent. Foreign traders can not directly invest in A shares, due to limitations of the Chinese government, but a larger foreign group approved by the Chinese government to buy shares as they want and then put the package in a different market like an ETF.
B shares are trading in Shanghai and Shenzhen stock exchanges in foreign currency. The nominal value of B shares will be determined in Renminbi. In Shanghai B shares are trading in U.S. dollar, while Shenzhen are trading in Hong Kong dollar.
H shares are trading on the Stock Exchange of Hong Kong are shares of companies in continent China. Many companies put their shares concurrently on the Hong Kong market and one of the two exchanges on the Chinese continent. Large price differences between the actions of H and A shares duplicate of the same company are not uncommon. Besides the general trade at a premium to H shares as the People's Republic of China government restricts continent Chinese to invest abroad and to foreigners to invest in the stock markets in China. H shares traded in HKD.
Red chips are shares in Chinese companies based outside continent of China and are trading in Hong Kong. The real business is based in the People's Republic of China and controlled directly or indirectly through organizations or enterprises by the state, provinces and municipalities in continent China. The word red is meant the People's Republic of China and the Communist Party of China.
China Investing Markets
Shanghai Stock Exchange (SSE)
The Shanghai Stock Exchange (called SSE), the first largest China investing stock exchange based in Shanghai, China. SSE stands as the sixth largest stock market in the world in term of market capitalization at 2.4 trillion USD in August 2010. Unlike the Hong Kong Stock Exchange, the stock market in Shanghai is not yet fully opened to foreign investors because of the strict controls on capital movements by the authorities in. It is a non-profit organization directly run from the China securities regulatory commission (called CSRC). The market for securities trading in Shanghai begins in late 1860. The securities are traded on the SSE includes three main categories of stocks, bonds and funds. Bonds are traded on the SSE include government bonds (T-Bond), corporate bonds, convertible bonds. T-bond market for small companies is the most active in China investing. There are two types of stocks in the Shanghai Stock Exchange published: A shares and B shares . A shares are traded in the currency of Renminbi or Yuan, while B shares are traded in U.S. dollar. In the beginning, A shares are traded limited only by domestic investors while B shares open to both domestic and foreign investors. But after the reforms were executed in December 2002, foreign investors are allowed (with restrictions) to buy and sell A-shares under the qualified foreign institutional investor (called QFII) in 2003. Nowaday, there are 98 foreign institutional investors are allowed to trade shares according to the QFII program. Quotas are allowed under the QFII program is currently $30 billion.
SSE is open for trading every Monday through Friday. The morning starts with a competitive price from 9.15am to 09.25am, and continues with subsequent bidding from 9.30am to 11.30am. It is followed by the afternoon bidding session consecutively from 13.00 to 15.00. The market close on Saturdays and Sundays and other public holidays when announce by the SSE.
The SSE composite index is the indicator for the performance of the market. December 1990 is the Base Day for SSE Composite Index. The base value is 100 for that day. The index was started 15th July 1991. At the end of 2006 the index had reached 2675.47. Other important indicators in the index of Shanghai Stock Exchange SSE SSE are used include SSE 50 and SSE 180 index. SSE Top 10 largest stock of China investing in order are:
- PetroChina (U.S. $ 3,656.200.000)
- Industrial and Commercial Bank of China (U.S. $ 1,417.930.000)
- Sinopec (U.S. $ 961.420.000)
- Bank of China (U.S. $ 894.420.000)
- China Shenhua Energy Company (U.S. $ 824.220.000)
- China Life (U.S. $ 667.390.000)
- China Merchants Bank (U.S. $ 352.740.000)
- Ping An Insurance (U.S. $ 272.530.000)
- Bank of Communications (U.S. $ 269.410.000)
- China Pacific Insurance (U.S. $ 256.640.000)
Shenzhen Stock Exchange
Shenzhen Stock Exchange is the second largest China investing stock exchange. It started trading the blue-chip composite index in January 1995. It also operated a subsidiary of the Shenzhen Securities Information Co., to start the Shenzhen Stock Exchange 100 index in the first trading week of 2003, based on the last day in 2002 as a benchmark. The new index includes leading companies such as Shenzhen Development Bank, the property developer China Vanke Co. Ltd and Guangdong Electric Power Co. Index components account holds about 40 percent of the capitalization of the Shenzhen Stock Exchange, 61 percent of the combined after-tax profit of listed companies in Shenzhen and 43 percent of trading turnover. The Shenzhen Stock Exchange simply adjusts the components of the index every six months. The Initial Public Offering (IPO) activity in Shenzhen stock exchange was suspended in September 2000 because the Chinese government merged it in a single exchange in Shanghai and launched a Nasdaq- style second board in Shenzhen oriented style with private business and technology. The central government closed the trade of Shenzhen and Shanghai stock exchanges over a week from 1 May 2003 against severe acute respiratory syndrome (SARS). On 22 November 2007 the Shenzhen Stock Exchange opened the new premises in the city of Shenzhen. The new Shenzhen Stock Exchange is presented as a financial center of civic responsibility.
Hong Kong Stock Exchange
The Stock Exchange of Hong Kong (called SEHK) is the third largest China investing stock exchange in Hong Kong. The exchange was usually the most important exchange in Hong Kong, where listed companies shares are traded there. This is the second largest exchange in Asia according to market capitalization, behind the Tokyo Stock Exchange. In 31 August 2010, the Stock Exchange of Hong Kong had 1356 listed companies with a combined market capitalization of $2.3 trillion. The stock market began officially in 1891, although informal exchanges have taken place since 1861. A trading day open a session of the auction from 9.30am to 09.50am The opening of a security was reported shortly after 9:50am. Morning continuous trading session from 10:00 am to 12:30 pm. Afternoon trading begins at 2:30 pm to 4: 00 pm. The closing price is reported average of five shots taken from 3.59pm to 4: 12 pm in every 15 seconds.
Written by: Goran Dolenc
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