Shanghai stock exchange began to lose its status as the largest of China’s stock market


The Shanghai stock exchange has lost the status of the largest volume of traded shares in China, which she has maintained for the last ten years. As reported by Bloomberg, according to this indicator, the country’s oldest ground ahead of unit of Shenzhen stock exchange Shenzhen’s Small and Medium Enterprise Board (SME Board), where the shares are traded non-state companies.

SME Board since 2004. 17 may 2016 its turnover for the first time slightly exceeded the turnover in Shanghai and since then, the indices of both exchanges was nearly equal. The past five days, turnover in both exchanges was approximately $27.1 billion

Over the past 12 months, the turnover of the Shanghai exchange fell by 86%. Since June 12 of last year, when after the peak 5178,19 item, the SSE Composite index began to decline, for three weeks of exchanges of Shanghai and Shenzhen has lost more than 30% of capitalization of almost $3.5 trillion. Then, and against a collapse in the Chinese stock market at the beginning of this year, investors started to reconsider their financial strategy: they began to invest in small and medium enterprises, avoiding investments in overvalued equities of public companies.

Investors switched on SME Board on which the shares are traded 790 companies, the market value of each of which is an average of $1.7 billion as examples of such a shift [towards non-state companies],” Bloomberg quotes the indicators listed on the SME Board of a little-known technology company Sevenstar Electronics today, its turnover is twice the turnover of state-owned Industrial and commercial Bank of China, the market value of which exceeds the value of the Sevenstar more than 100 times.

According to the Agency, more than 100 million individual traders to invest in environmentally friendly enterprises, companies in the field of electronic Commerce and manufacturers of lithium-ion batteries. The greatest preference in which investors favor the stock of the manufacturer of parts for lithium-ion batteries in Guangzhou Tinci Materials Technology and the owner of the largest online retailer of nuts Haoxiangni Jujube. The daily turnover of the shares of Guangzhou Tinci Materials in 2016 exceeded the 2015 more than five times the daily turnover Haoxiangni increased by 50%. Shares of both companies increased in 2016 by more than 130%, says Bloomberg.

On the SME Board more opportunities for special, non-standard investment, says Agency analyst KGI Securities Co. Shanghai Ken Chen. “Given that China’s economy will not rise in the near future and that the traditional sectors are experiencing hard times, investors will prefer the securities on the SME Board is still some time,” he said.

Greater volatility, characterized by small enterprises, which are not supported by the state, and attracts speculators gambling on short positions. The Shanghai stock exchange, fluctuations which are one of the risk factors for social stability, supported by the state, and it’s alienating a significant number of players.

According to the analyst of Shenwan Hongyuan Group Fu Jintao, although in the coming months, the SME Board and Shanghai stock exchange can compete for status as the largest exchange by volume traded shares, SME Board represents the future of the Chinese stock markets. “In the short term the trend may not last. In the long-term cycle is still hope that the new economy will be the future trade on the stock markets,” he said.

At the auction on Friday, June 24, the SME Board turnover exceeded the turnover of Shenzhen stock exchange by 130% and 46% of its units ChiNext, the exchange on which the shares are traded mainly high-tech companies [similar to the American NASDAQ].

The Shanghai stock exchange was founded in 1990 and for the last ten years was the largest marketplace in mainland China. Has the status of a non-profit organization, operates under the control of the securities Commission of the PRC.

Shanghai stock exchange is the fifth in the world by market capitalization [¥25 trillion, or $3.8 trillion on June 28] and the second in Asia.

And Shanghai, and Shenjansky exchange partially closed to foreign investors — that is the position of the state, which controls the financial system of the country. In June the Chinese Central Bank for the first time permitted foreign companies to trade their shares on mainland exchanges as well as considering to allow mainland banks to trade in the offshore yuan market in Hong Kong.